# EDGAR Filing Document

**Accession Number:** 0000030371
**File Stem:** 0001104659-25-070038
**Filing Date:** 2025-7
**Character Count:** 1711220
**Document Hash:** 0ea9d54b1a58ac50c9f209c5b37a63f8
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0001104659-25-070038.hdr.sgml**: 20250723

**ACCESSION NUMBER**: 0001104659-25-070038

**CONFORMED SUBMISSION TYPE**: SF-1

**PUBLIC DOCUMENT COUNT**: 15

**FILED AS OF DATE**: 20250723

**DATE AS OF CHANGE**: 20250723

**ABS ASSET CLASS**: Debt Securities

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Duke Energy Carolinas, LLC
- **CENTRAL INDEX KEY:** 0000030371
- **STANDARD INDUSTRIAL CLASSIFICATION:** ELECTRIC SERVICES [4911]
- **ORGANIZATION NAME:** 01 Energy & Transportation
- **EIN:** 560205520
- **STATE OF INCORPORATION:** NC
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** SF-1
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-288891
- **FILM NUMBER:** 251143558

**BUSINESS ADDRESS:**
- **STREET 1:** 525 SOUTH TRYON STREET
- **CITY:** CHARLOTTE
- **STATE:** NC
- **ZIP:** 28202
- **BUSINESS PHONE:** 800-488-3853

**MAIL ADDRESS:**
- **STREET 1:** 525 SOUTH TRYON STREET
- **CITY:** CHARLOTTE
- **STATE:** NC
- **ZIP:** 28202

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** Duke Power CO LLC
- **DATE OF NAME CHANGE:** 20060403

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** DUKE ENERGY CORP
- **DATE OF NAME CHANGE:** 19970618

**FORMER COMPANY:**
- **FORMER CONFORMED NAME:** DUKE POWER CO /NC/
- **DATE OF NAME CHANGE:** 19920703
**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** Duke Energy Carolinas NC Storm Funding II LLC
- **CENTRAL INDEX KEY:** 0002078092

**ORGANIZATION NAME:**
- **EIN:** 393181611
- **STATE OF INCORPORATION:** DE
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** SF-1
- **SEC ACT:** 1933 Act
- **SEC FILE NUMBER:** 333-288891-01
- **FILM NUMBER:** 251143559

**BUSINESS ADDRESS:**
- **STREET 1:** 525 SOUTH TRYON STREET
- **CITY:** CHARLOTTE
- **STATE:** NC
- **ZIP:** 28202
- **BUSINESS PHONE:** 704-382-8251

**MAIL ADDRESS:**
- **STREET 1:** 525 SOUTH TRYON STREET
- **CITY:** CHARLOTTE
- **STATE:** NC
- **ZIP:** 28202

**[**TABLE OF CONTENTS**](#TOC)

As filed with the Securities and Exchange Commission on July 23, 2025

Registration Nos. 333- and 333- -01

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM SF-1

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

---

| | |
|:---|:---|
| Duke Energy Carolinas, LLC <br> (Exact name of registrant, sponsor and depositor as specified in its charter)  | Duke Energy Carolinas NC Storm Funding II LLC <br> (Exact name of registrant and issuing entity as specified in its charter)  |
| North Carolina <br> (State or other jurisdiction of incorporation or organization)  | Delaware <br> (State or other jurisdiction of incorporation or organization)  |
| 1-4928 <br> (Commission File Number)  |  |
| 0000030371 <br> (Central Index Key Number)  | 0002078092 <br> (Central Index Key Number)  |
| 56-0205520 <br> (I.R.S. Employer Identification Number)  | 39-3183527 <br> (I.R.S. Employer Identification Number)  |
| 525 South Tryon Street Charlotte, North Carolina 28202 (800)-488-3853 <br> (Address, including zip code, and telephone number, including area code, of depositor's principal executive offices)  | 525 South Tryon Street Charlotte, North Carolina 28202 (800)-488-3853 <br> (Address, including zip code, and telephone number, including area code, of issuing entity's principal executive offices)  |

---

Elizabeth H. Jones Assistant Secretary 525 South Tryon Street Charlotte, North Carolina 28202

(Name, address, including zip code, and telephone number, including area code, of agent for service)

With Copies to:

Michael F. Fitzpatrick, Jr. Adam R. O'Brian Hunton Andrews Kurth LLP 200 Park Avenue New York, NY 10166 (212) 309-1000 Eric D. Tashman, Esq. Norton Rose Fulbright US LLP One Embarcadero Center, Suite 1050 San Francisco, California 94111 (628) 231-6803

Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐

The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrants shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until this Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

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[**TABLE OF CONTENTS**](#TOC)

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

#### SUBJECT TO COMPLETION, JULY 23, 2025

#### PRELIMINARY PROSPECTUS

#### $ SERIES A SENIOR SECURED STORM RECOVERY BONDS

#### DUKE ENERGY CAROLINAS, LLC

#### Sponsor, Depositor and Initial Servicer Central Index Key Number: 0000030371

#### DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC

#### Issuing Entity Central Index Key Number: 0002078092

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| **Tranche**  | **Expected <br> Weighted <br> Average <br> Life (Years)\***  | **Principal <br> Amount <br> Offered\***  | &nbsp;&nbsp; **Scheduled <br> Final <br> Payment <br> Date\***  | **Final <br> Maturity <br> Date\***  | **Interest <br> Rate(1)**  | **Initial <br> Price to <br> Public**  | **Underwriting <br> Discounts and <br> Commissions**  | &nbsp;&nbsp; **Proceeds to <br> Issuing Entity <br> (Before <br> Expenses)**  |
|  |  |  | $— |  | &nbsp;&nbsp;% | &nbsp;&nbsp;% | &nbsp;&nbsp;&nbsp;&nbsp;% | $|
|  |  |  | $— |  | &nbsp;&nbsp;% | &nbsp;&nbsp;% | &nbsp;&nbsp;&nbsp;&nbsp;% | $|
|  |  |  | $— |  | &nbsp;&nbsp;% | &nbsp;&nbsp;% | &nbsp;&nbsp;&nbsp;&nbsp;% | $|

---

\*

Preliminary, subject to change

(1) Interest on the Bonds will accrue from , 2025. If the Bonds are delivered after that date, the purchaser will pay accrued interest.

The total price to the public is $. The total amount of the underwriting discounts and commissions is $. The total amount of proceeds to Duke Energy Carolinas NC Storm Funding II LLC before deduction of expenses (estimated to be $) is $.

Duke Energy Carolinas, LLC or "**DEC**", as "**depositor**", is offering $ of Series A Senior Secured Storm Recovery Bonds, referred to herein as the "**Storm Recovery Bonds**" or "**Bonds**", in three tranches to be issued by Duke Energy Carolinas NC Storm Funding II LLC, referred to herein as "**DEC NC Storm Funding II**", as the issuing entity. DEC is also the "**seller**", "**initial servicer**" and "**sponsor**" with regard to the Bonds.

The Bonds are senior secured obligations of DEC NC Storm Funding II, and are its obligations only. The Series A Senior Secured Storm Recovery Bonds are supported by "**storm recovery property**", which consists of all rights and interest of DEC NC Storm Funding II under the financing order, including the right to impose, bill, charge, collect and receive nonbypassable charges based on the usage of electricity from DEC's existing or future retail customers in North Carolina receiving transmission or distribution service, or both. These charges pay principal, interest and expenses of the Bonds and are known as "**storm recovery charges**" and upon the issuance of the Bonds may not be reduced, altered or impaired except as adjusted pursuant to the true-up mechanism described herein. These charges will be paid by all existing and future North Carolina customers receiving transmission or distribution service from DEC, or its successors or assignees under rate schedules approved by the North Carolina Utilities Commission, referred to herein as the "**NCUC**", or under special contracts. Storm recovery charges are payable by customers even if the customers elect to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in North Carolina. Storm recovery property includes the right to a mandatory true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of storm recovery charges or to otherwise ensure the timely payment of principal of and interest on the Bonds when due and other financing costs and other required amounts and charges payable in connection with the Bonds. With respect to the foregoing, interest is due on each payment date for all tranches and principal for a specific tranche is due upon the final maturity date for such tranche and the NCUC, except for changes made pursuant to the formula-based adjustment mechanism authorized under in the financing order, may not reduce, alter, or impair storm recovery charges until any and all principal, interest, premium, financing costs and other costs have been paid in full.

The Bonds do not constitute a debt, liability or other obligation of, or interest in, DEC or any of its other affiliates (other than DEC NC Storm Funding II). The Bonds will not be insured or guaranteed by DEC, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The Bonds will be nonrecourse obligations, secured only by the collateral. The Bonds are not a debt or general obligation of the NCUC, the State of North Carolina or any of its political subdivisions, agencies, or instrumentalities.

The Bonds will accrue interest from the date of issuance. The Bonds are scheduled to pay interest semi-annually and principal semi-annually and sequentially as described herein. We will pay interest and principal on the Bonds on and of each year, beginning on , 20 . The Bonds are not subject to optional redemption prior to maturity.

The Bonds will be payable only from revenues received by DEC NC Storm Funding II under the indenture for the Bonds and funds on deposit in trust accounts relating to the Bonds. These amounts, together with the storm recovery property, are the source of funds for the payment of principal of and interest on the Bonds. A capital subaccount will hold the depositor's capital contribution to DEC NC Storm Funding II. An excess funds subaccount will hold revenues that are collected but not needed to meet current obligations associated with the Bonds. Credit enhancement for the Bonds will be provided by the true-up mechanism, as well as the capital subaccount. The primary purpose of the excess funds subaccount is not to provide credit enhancement for the Bonds. However, amounts in the excess funds subaccount may be used to make debt service payments on the Bonds when needed.

DEC is the depositor, sponsor, seller and initial servicer with regard to the Bonds. DEC is the sole member and owner of DEC NC Storm Funding II's equity interest. DEC NC Storm Funding II's Central Index Key number is 0002078092. DEC's Central Index Key number is 0000030371.

#### Investing in the Bonds involves risks. See " Risk Factors " beginning on page 21 to read about factors you should consider before buying the Bonds.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The Bonds will be ready for delivery in book-entry form through the facilities of The Depository Trust Company against payment in New York, New York on or about .

 *Joint Book-Running Managers* 

#### RBC Capital Markets Barclays

#### The date of this prospectus is , 2025

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[**TABLE OF CONTENTS**](#TOC)

#### **TABLE OF CONTENTS**

---

| | |
|:---|:---|
| | **Page**  |
| [ABOUT THIS PROSPECTUS](#tATP)  | [1](#tATP) |
| [OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS](#tORIC)  | [2](#tORIC) |
| [NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA](#tNTRO)  | [2](#tNTRO) |
| [NOTICE TO RESIDENTS OF UNITED KINGDOM](#tNTRO1)  | [3](#tNTRO1) |
| [NOTICE TO RESIDENTS OF CANADA](#tNTRO2)  | [4](#tNTRO2) |
| [CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS](#tCSRF)  | [5](#tCSRF) |
| [PROSPECTUS SUMMARY](#tPRSU)  | [7](#tPRSU) |
| [SUMMARY OF RISK FACTORS](#tSORF)  | [19](#tSORF) |
| [RISK FACTORS](#tRIFA)  | [21](#tRIFA) |
| &nbsp;&nbsp;&nbsp; [Risks Associated with Potential Judicial, Legislative or Regulatory Actions](#tRAWP)  | [21](#tRAWP) |
| &nbsp;&nbsp;&nbsp; [Servicing Forecasting Risks](#tSFR)  | [25](#tSFR) |
| &nbsp;&nbsp;&nbsp; [Risk Associated with the Unusual Nature of the Storm Recovery Property](#tRAWT)  | [28](#tRAWT) |
| &nbsp;&nbsp;&nbsp; [Risk Associated with Storms](#tRAWS)  | [28](#tRAWS) |
| &nbsp;&nbsp;&nbsp; [Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer](#tRAWP1)  | [29](#tRAWP1) |
| &nbsp;&nbsp;&nbsp; [Other Risks Associated with the Purchase of the Bonds](#tORAW)  | [32](#tORAW) |
| [DEC'S REVIEW OF STORM RECOVERY PROPERTY](#tDROS)  | [37](#tDROS) |
| [THE STORM RECOVERY PROPERTY AND THE FINANCING ACT](#tTSRP)  | [40](#tTSRP) |
| [DEC'S FINANCING ORDER](#tDFO)  | [45](#tDFO) |
| [THE ISSUING ENTITY](#tTIE)  | [48](#tTIE) |
| [THE ADMINISTRATION AGREEMENT](#tTAA)  | [53](#tTAA) |
| [RELATIONSHIP TO 2021 NC STORM RECOVERY BONDS](#tRT2N)  | [54](#tRT2N) |
| [DUKE ENERGY CAROLINAS, LLC](#tDECL)  | [55](#tDECL) |
| [DESCRIPTION OF THE STORM RECOVERY BONDS](#tDOTS)  | [61](#tDOTS) |
| [THE INDENTURE TRUSTEE](#tTIT)  | [83](#tTIT) |
| [SECURITY FOR THE STORM RECOVERY BONDS](#tSFTS)  | [86](#tSFTS) |
| [WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE BONDS](#tWALA)  | [92](#tWALA) |
| [ESTIMATED ANNUAL FEES AND EXPENSES](#tEAFA)  | [94](#tEAFA) |
| [THE SALE AGREEMENT](#tTSA)  | [95](#tTSA) |
| [THE SERVICING AGREEMENT](#tTSA1)  | [105](#tTSA1) |
| [INTERCREDITOR AGREEMENTS](#tINAG)  | [115](#tINAG) |
| [MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES](#tMUFI)  | [116](#tMUFI) |
| [STATE AND OTHER TAX CONSEQUENCES](#tSAOT)  | [120](#tSAOT) |
| [ERISA CONSIDERATIONS](#tERCO)  | [121](#tERCO) |
| [BANKRUPTCY AND CREDITORS' RIGHTS ISSUES](#tBACR)  | [125](#tBACR) |
| [USE OF PROCEEDS](#tUOP)  | [129](#tUOP) |
| [PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)](#tPODC)  | [130](#tPODC) |
| [AFFILIATIONS AND CERTAIN RELATIONSHIPS](#tAACR)  | [132](#tAACR) |
| [LEGAL PROCEEDINGS](#tLEPR)  | [133](#tLEPR) |
| [RATINGS](#tRAT)  | [134](#tRAT) |
| [INVESTMENT COMPANY ACT OF 1940 AND VOLCKER RULE MATTERS](#tICAO)  | [135](#tICAO) |
| [RISK RETENTION](#tRIRE)  | [136](#tRIRE) |

---

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[**TABLE OF CONTENTS**](#TOC2)

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| | | |
|:---|:---|:---|
| | **Page**  | **Page**  |
| [WHERE YOU CAN FIND MORE INFORMATION](#tWYCF)  |  | [137](#tWYCF) |
| [INCORPORATION BY REFERENCE](#tIBR)  |  | [138](#tIBR) |
| [LEGAL MATTERS](#tLEMA)  |  | [139](#tLEMA) |
| [GLOSSARY](#tGLO)  |  | [140](#tGLO) |

---

ii

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#### ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement filed with the Securities and Exchange Commission, or "**SEC**". This prospectus provides you with a description of the Series A Senior Secured Storm Recovery Bonds being offered. You should carefully review this prospectus and the information, if any, contained in the documents referenced in this prospectus under the heading "Where You Can Find More Information."

References in this prospectus to "**we**", "**us**", "**our**", the "**issuing entity**" or "**DEC NC Storm Funding II**" means "**Duke Energy Carolinas NC Storm Funding II LLC**". References to "**DEC**", the "**depositor"** or the "**sponsor**" refer to Duke Energy Carolinas, LLC or to any successor thereto. References to the "**servicer**" are to DEC, and any successor servicer under the servicing agreement described in this prospectus. References to the "**seller**" mean DEC or any successor under the sale agreement described in this prospectus. References to the "**administrator**" mean DEC, or any successor or assignee under the administration agreement described in this prospectus. References to the "**NCUC**" are to the North Carolina Utilities Commission. References to the "**Financing Act**" are to Section 62-172, North Carolina General Statutes. Unless the context otherwise requires, the term "**customer**" means all existing and future customers receiving transmission or distribution service from DEC or its successors or assignees under NCUC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in North Carolina. References to a "**financing order**", unless the context indicates otherwise, are to the irrevocable financing order, dated June 18, 2025, issued by the NCUC to DEC. You can find a glossary of some of the other defined terms used in this prospectus on page [140](#tGLO) of this prospectus.

We have included cross-references to sections in this prospectus to allow you to find further related discussions. You can also find key topics in the table of contents on the preceding pages. Check the table of contents to locate these sections.

You should rely only on the information contained or incorporated by reference in this prospectus. Neither we nor the depositor has authorized anyone else to provide you with any different information. If anyone provides you with different or inconsistent information, you should not rely on it. The Bonds are not being offered in any jurisdiction where the offer or sale is not permitted. The information in this prospectus is current only as of the date of this prospectus.

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#### OFFERING RESTRICTIONS IN CERTAIN JURISDICTIONS

#### NOTICE TO RESIDENTS OF THE EUROPEAN ECONOMIC AREA
THE BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO, AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO, ANY RETAIL INVESTOR IN THE EUROPEAN ECONOMIC AREA **("EEA**"**).** FOR THESE PURPOSES, THE EXPRESSION "**RETAIL INVESTOR**" MEANS A PERSON WHO IS ONE (OR MORE) OF THE FOLLOWING: (1) A RETAIL CLIENT AS DEFINED IN POINT (11) OF ARTICLE 4(1) OF DIRECTIVE 2014/65/EU (AS AMENDED, "**MIFID II**"**);** (2) A CUSTOMER WITHIN THE MEANING OF DIRECTIVE (EU) 2016/97 (AS AMENDED), WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT AS DEFINED IN POINT (10) OF ARTICLE 4(1) OF MIFID II; OR (3) NOT A QUALIFIED INVESTOR **("QUALIFIED INVESTOR**"**)** WITHIN THE MEANING OF REGULATION 2017/1129 (AS AMENDED, THE "**PROSPECTUS REGULATION**"**).** CONSEQUENTLY NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 (AS AMENDED, THE "**PRIIPS REGULATION**"**)** FOR OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE EEA HAS BEEN PREPARED; AND THEREFORE OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE EEA MAY BE UNLAWFUL UNDER THE PRIIPS REGULATION.

THIS PROSPECTUS IS NOT A PROSPECTUS FOR PURPOSES OF THE PROSPECTUS REGULATION. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF BONDS IN ANY MEMBER STATE OF THE EEA (EACH, A "**RELEVANT STATE**"**)** WILL BE MADE ONLY PURSUANT TO AN EXEMPTION UNDER THE PROSPECTUS REGULATION FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF BONDS. ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT STATE OF BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY ONLY DO SO IN CIRCUMSTANCES IN WHICH NO OBLIGATION ARISES FOR THE ISSUING ENTITY OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS PURSUANT TO ARTICLE 3 OF THE PROSPECTUS REGULATION, IN RELATION TO SUCH OFFER. NEITHER THE ISSUING ENTITY NOR ANY UNDERWRITER HAVE AUTHORISED, NOR DO THEY AUTHORISE, THE MAKING OF ANY OFFER OF BONDS IN CIRCUMSTANCES IN WHICH AN OBLIGATION ARISES FOR THE ISSUING ENTITY OR ANY OF THE UNDERWRITERS TO PUBLISH A PROSPECTUS FOR SUCH OFFER.

ACCORDINGLY, ANY PERSON MAKING OR INTENDING TO MAKE AN OFFER IN THAT RELEVANT MEMBER STATE OF BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED IN THIS PROSPECTUS MAY DO SO ONLY WITH RESPECT TO QUALIFIED INVESTORS. NEITHER WE NOR ANY UNDERWRITER HAS AUTHORIZED, NOR DO WE OR THEY AUTHORIZE, THE MAKING OF ANY OFFER OF BONDS OTHER THAN TO QUALIFIED INVESTORS.

ANY DISTRIBUTOR SUBJECT TO MIFID II THAT IS OFFERING, SELLING OR RECOMMENDING THE BONDS IS RESPONSIBLE FOR UNDERTAKING ITS OWN TARGET MARKET ASSESSMENT IN RESPECT OF THE BONDS AND DETERMINING ITS OWN DISTRIBUTION CHANNELS FOR THE PURPOSES OF THE MIFID II PRODUCT GOVERNANCE RULES UNDER COMMISSION DELEGATED DIRECTIVE (EU) 2017/593 (AS AMENDED, THE "**DELEGATED DIRECTIVE**"**).** NEITHER WE NOR ANY UNDERWRITER MAKES ANY REPRESENTATIONS OR WARRANTIES AS TO A DISTRIBUTOR'S COMPLIANCE WITH THE DELEGATED DIRECTIVE.

EACH UNDERWRITER HAS REPRESENTED AND AGREED THAT IT HAS NOT OFFERED, SOLD OR OTHERWISE MADE AVAILABLE, AND WILL NOT OFFER, SELL OR OTHERWISE MAKE AVAILABLE, ANY BONDS WHICH ARE THE SUBJECT OF THE OFFERING CONTEMPLATED BY THIS PROSPECTUS TO ANY RETAIL INVESTOR (AS DEFINED ABOVE) IN THE EEA. FOR THIS PURPOSE, THE EXPRESSION OFFER INCLUDES THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION

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ON THE TERMS OF THE OFFER AND THE BONDS SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE FOR THE BONDS.

#### NOTICE TO RESIDENTS OF UNITED KINGDOM
THE BONDS ARE NOT INTENDED TO BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO AND SHOULD NOT BE OFFERED, SOLD OR OTHERWISE MADE AVAILABLE TO ANY RETAIL INVESTOR IN THE UNITED KINGDOM ("**UK**"). FOR THE PURPOSES OF THIS PROVISION:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (A) THE EXPRESSION "RETAIL INVESTOR" MEANS A PERSON WHO IS ONE (OR MORE) OF THE FOLLOWING:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (I) A RETAIL CLIENT AS DEFINED IN POINT (8) OF ARTICLE 2 OF REGULATION (EU) NO 2017/565 AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018 ("**EUWA**"); OR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (II) A CUSTOMER WITHIN THE MEANING OF THE PROVISIONS OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (AS AMENDED, THE "**FSMA**") OF THE UNITED KINGDOM AND ANY RULES OR REGULATIONS MADE UNDER THE FSMA TO IMPLEMENT DIRECTIVE (EU) 2016/97, WHERE THAT CUSTOMER WOULD NOT QUALIFY AS A PROFESSIONAL CLIENT, AS DEFINED IN POINT (8) OF ARTICLE 2(1) OF REGULATION (EU) NO 600/2014 AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA; OR

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (III) NOT A QUALIFIED INVESTOR AS DEFINED IN ARTICLE 2 OF THE PROSPECTUS REGULATION AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA (THE "**UK PROSPECTUS REGULATION**"); AND

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (B) THE EXPRESSION "OFFER" INCLUDES THE COMMUNICATION IN ANY FORM AND BY ANY MEANS OF SUFFICIENT INFORMATION ON THE TERMS OF THE OFFER AND THE BONDS TO BE OFFERED SO AS TO ENABLE AN INVESTOR TO DECIDE TO PURCHASE OR SUBSCRIBE FOR THE BONDS.

CONSEQUENTLY, NO KEY INFORMATION DOCUMENT REQUIRED BY REGULATION (EU) NO 1286/2014 AS IT FORMS PART OF DOMESTIC LAW BY VIRTUE OF THE EUWA (THE "**UK PRIIPS REGULATION**"**)** FOR OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO RETAIL INVESTORS IN THE UK HAS BEEN PREPARED AND THEREFORE OFFERING OR SELLING THE BONDS OR OTHERWISE MAKING THEM AVAILABLE TO ANY RETAIL INVESTOR IN THE UK MAY BE UNLAWFUL UNDER THE UK PRIIPS REGULATION. THIS PROSPECTUS HAS BEEN PREPARED ON THE BASIS THAT ANY OFFER OF BONDS IN THE UK WILL BE MADE PURSUANT TO AN EXEMPTION UNDER THE UK PROSPECTUS REGULATION FROM THE REQUIREMENT TO PUBLISH A PROSPECTUS FOR OFFERS OF BONDS. THIS IS NOT A PROSPECTUS FOR THE PURPOSES OF THE UK PROSPECTUS REGULATION.

THIS PROSPECTUS AND ANY OTHER MATERIAL IN RELATION TO THE BONDS IS ONLY BEING DISTRIBUTED TO, AND IS DIRECTED ONLY AT, PERSONS IN THE UK WHO ARE "QUALIFIED INVESTORS" (AS DEFINED IN THE UK PROSPECTUS REGULATION WHO ARE ALSO (I) INVESTMENT PROFESSIONALS FALLING WITHIN ARTICLE 19(5) OF THE FINANCIAL SERVICES AND MARKETS ACT 2000 (FINANCIAL PROMOTION) ORDER 2005 (AS AMENDED, THE "**ORDER**"**),** OR (II) HIGH NET WORTH ENTITIES OR OTHER PERSONS FALLING WITHIN ARTICLES 49(2)(A) TO (D) OF THE ORDER, OR (III) PERSONS TO WHOM IT WOULD OTHERWISE BE LAWFUL TO DISTRIBUTE IT, ALL SUCH PERSONS TOGETHER BEING REFERRED TO AS "**RELEVANT PERSONS**"**.** THE BONDS ARE ONLY AVAILABLE TO, AND ANY INVITATION, OFFER OR AGREEMENT TO SUBSCRIBE, PURCHASE OR OTHERWISE ACQUIRE SUCH BONDS WILL BE ENGAGED IN ONLY WITH, RELEVANT PERSONS. THIS PROSPECTUS AND ITS CONTENTS ARE CONFIDENTIAL AND SHOULD NOT BE DISTRIBUTED, PUBLISHED OR REPRODUCED (IN WHOLE OR IN PART) OR DISCLOSED BY

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ANY RECIPIENTS TO ANY OTHER PERSON IN THE UK. ANY PERSON IN THE UK THAT IS NOT A RELEVANT PERSON SHOULD NOT ACT OR RELY ON THIS PROSPECTUS OR ITS CONTENTS. THE BONDS ARE NOT BEING OFFERED TO THE PUBLIC IN THE UK.

IN ADDITION, IN THE UK, EACH UNDERWRITER HAS REPRESENTED AND AGREED IN THE UNDERWRITING AGREEMENT THAT THE BONDS MAY NOT BE OFFERED OTHER THAN BY AN UNDERWRITER THAT:

HAS ONLY COMMUNICATED OR CAUSED TO BE COMMUNICATED AND WILL ONLY COMMUNICATE OR CAUSE TO BE COMMUNICATED AN INVITATION OR INDUCEMENT TO ENGAGE IN INVESTMENT ACTIVITY (WITHIN THE MEANING OF SECTION 21 OF THE FSMA) RECEIVED BY IT IN CONNECTION WITH THE ISSUE OR SALE OF THE BONDS IN CIRCUMSTANCES IN WHICH SECTION 21(1) OF THE FSMA DOES NOT APPLY TO US; AND

HAS COMPLIED AND WILL COMPLY WITH ALL APPLICABLE PROVISIONS OF THE FSMA WITH RESPECT TO ANYTHING DONE BY IT IN RELATION TO THE BONDS IN, FROM OR OTHERWISE INVOLVING THE UK.

#### NOTICE TO RESIDENTS OF CANADA
THE BONDS MAY BE SOLD IN THE PROVINCES OF ALBERTA, BRITISH COLUMBIA AND ONTARIO ONLY TO PURCHASERS PURCHASING, OR DEEMED TO BE PURCHASING, AS PRINCIPAL THAT ARE ACCREDITED INVESTORS, AS DEFINED IN NATIONAL INSTRUMENT 45-106 PROSPECTUS EXEMPTIONS OR SUBSECTION 73.3(1) OF THE SECURITIES ACT (ONTARIO), AND ARE PERMITTED CLIENTS, AS DEFINED IN NATIONAL INSTRUMENT 31-103 REGISTRATION REQUIREMENTS, EXEMPTIONS AND ONGOING REGISTRANT OBLIGATIONS. ANY RESALE OF THE BONDS MUST BE MADE IN ACCORDANCE WITH AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE PROSPECTUS REQUIREMENTS OF APPLICABLE SECURITIES LAWS.

SECURITIES LEGISLATION IN CERTAIN PROVINCES OR TERRITORIES OF CANADA MAY PROVIDE A PURCHASER WITH REMEDIES FOR RESCISSION OR DAMAGES IF THIS PROSPECTUS (INCLUDING ANY AMENDMENT THERETO) CONTAINS A MISREPRESENTATION, PROVIDED THAT THE REMEDIES FOR RESCISSION OR DAMAGES ARE EXERCISED BY THE PURCHASER WITHIN THE TIME LIMIT PRESCRIBED BY THE SECURITIES LEGISLATION OF THE PURCHASER'S PROVINCE OR TERRITORY. THE PURCHASER SHOULD REFER TO ANY APPLICABLE PROVISIONS OF THE SECURITIES LEGISLATION OF THE PURCHASER'S PROVINCE OR TERRITORY FOR PARTICULARS OF THESE RIGHTS OR CONSULT WITH A LEGAL ADVISOR.

PURSUANT TO SECTION 3A.3 OF NATIONAL INSTRUMENT 33-105 UNDERWRITING CONFLICTS (NI 33-105), THE UNDERWRITERS ARE NOT REQUIRED TO COMPLY WITH THE DISCLOSURE REQUIREMENTS OF NI 33-105 REGARDING UNDERWRITER CONFLICTS OF INTEREST IN CONNECTION WITH THIS OFFERING.

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#### CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This prospectus includes forward-looking statements, including regarding expectations, estimates and projections about the electric consumption of customers, DEC's ability to service the storm recovery property and collect the storm recovery charges, the issuing entity's ability to pay back the Bonds, and the NCUC's adherence to the North Carolina state pledge to protect the right of bondholders. Any statements that express, or involve discussions as to, expectations, beliefs, plans, objectives, assumptions or future events of performance (often, but not always, through the use of words or phrases such as "will," "will likely result," "are expected to," "will continue," "is anticipated," "believe," "could," "should," "estimated," "may," "plan," "potential," "projection," "target," "outlook," "is designed to," or "intended") are not statements of historical facts and may be forward-looking. Forward-looking statements involve estimates, assumptions and uncertainties. Accordingly, any such statements are qualified in their entirety by reference to important factors included in "Risk Factors" (in addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements) that could have a significant impact on financial results, and could cause actual results to differ materially from those contained in forward-looking statements made by or on behalf of us or DEC, in this prospectus, in presentations, on websites, in response to questions or otherwise.

The following are some factors, among others, that could cause actual results to differ materially from those expressed or implied by forward-looking statements in this prospectus:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • State and federal legislative and regulatory initiatives, including cost of compliance with existing and future environmental requirements, including those related to climate change, as well as rulings that affect cost and investment and investment recovery or have an impact on rate structures or market prices;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the accuracy of the servicer's estimates of future demand and prices for energy;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the impact of extraordinary external events, such as a global pandemic or military conflict, and their collateral consequences, including the disruption of global supply chains or the economic activity in DEC's service territory, and the influence of weather and other natural phenomena affecting electric customer energy usage in DEC's service territory, including the economic, operational and other effects of severe storms, hurricanes, droughts, wild fires and tornadoes, including extreme weather associated with climate change;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • costs and effects of legal and administrative proceedings, settlements, investigations and claims;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the accuracy of the servicer's forecast of energy consumption due to industrial, commercial and residential decline in service territory or customer bases resulting from sustained downturns of the economy, storm damage, reduced customer usage due to cost pressures from inflation, tariffs, or fuel costs, worsening economic health of DEC's service territory, reductions in customer usage patterns, or lower than anticipated load growth, energy efficiency efforts and use of alternative energy sources, such as self-generation and distributed generation technologies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • federal and state regulations, laws and other efforts designed to promote and expand the use of energy efficiency measures and distributed generation technologies, such as private solar and battery storage, in DEC's service territory could result in a reduced number of customers , excess generation resources as well as stranded costs;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • advancements in technology, including artificial intelligence;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • additional competition in electric markets and continued industry consolidation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the ability to successfully operate electric generating facilities and deliver electricity to customers including direct or indirect effects to DEC resulting from an incident that affects the United States electric grid or generating resources;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the impact on DEC's facilities and business from a terrorist or other attack, war, vandalism, cybersecurity threats, data security breaches, operational events, information technology failures or other catastrophic events, such as severe storms, fires, explosions, pandemic health events or other similar occurrences;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the accuracy of the servicer's estimates of the customer payment patterns, including the rate of delinquencies and any collections curves;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the reliability of the systems, procedures and other infrastructure necessary to operate the electric business in DEC's service territory; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • other factors discussed in this prospectus and any of our subsequent SEC filings.

You should not place undue reliance on forward looking statements. Each forward-looking statement speaks only as of the date on which such statement is made. New factors emerge from time to time and it is not possible for management to predict all of such factors, nor can it assess the impact of each such factor on the business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statement.

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#### PROSPECTUS SUMMARY
This summary highlights some information from this prospectus. Because this is a summary, it does not contain all of the information that may be important to you. You should read this prospectus in its entirety before you buy the Bonds.

#### You should carefully consider the Risk Factors beginning on page 21 of this prospectus before you invest in the Bonds
Securities offered:

Series A Senior Secured Storm Recovery Bonds of Duke Energy Carolinas NC Storm Funding II LLC, as listed on the cover page of this prospectus (collectively, the "Bonds" or "Storm Recovery Bonds"), beginning on the Initial Payment Date, we will pay interest semi-annually and principal semi-annually and sequentially in accordance with the sinking fund schedule described in this prospectus.

Issuing entity and capital structure:

Duke Energy Carolinas NC Storm Funding II LLC is a special purpose subsidiary of DEC, organized as a Delaware limited liability company. DEC is our sole member and owns all of our equity interests. The issuing entity has no commercial operations. We were formed for the limited purpose of purchasing, owning and administering storm recovery property, issuing storm recovery bonds from time to time (including the Bonds) and performing activities incidental thereto to finance certain activities of DEC related to the recovery of storm recovery costs. These are the first storm recovery bonds which DEC NC Storm Funding II has issued.

The issuing entity will be capitalized with an upfront cash deposit by DEC of 0.50% of the Bonds' principal amount issued (to be held in the capital subaccount) and will establish an excess funds subaccount to retain, until the next payment date, any amounts collected and remaining after all scheduled payments due on such payment date for the Bonds have been made.

Our address and phone number are as follows: 525 South Tryon Street, Charlotte, North Carolina 28202, 800-488-3853.

Federal income tax status:

The Bonds will be treated as debt of DEC for U.S. federal income tax purposes. See "Material U.S. Federal Income Tax Consequences" in this prospectus. For U.S. federal income tax purposes, DEC will not recognize gross income unless and until DEC bills customers for the storm recovery charges and only in connection with such billing of customers for such storm recovery charges.

The depositor, sponsor, seller and initial servicer of the Bonds:

DEC is a regulated public utility primarily engaged in the generation, transmission, distribution, and sale of electricity in portions of North Carolina and South Carolina. DEC's service area covers approximately 24,000 square miles. DEC supplies electric service to approximately 2.4 million residential, commercial and industrial service customers in North Carolina. During the twelve months ended December 31, 2024, DEC billed approximately 58.8 billion kilowatt hours of electricity to its electric customers in North Carolina, resulting in revenues of approximately $6.5 billion. DEC's retail rates payable by its North Carolina customers are regulated by NCUC. The storm recovery charges will be imposed only on DEC's customers in North Carolina.

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The address of DEC is as follows: 525 South Tryon Street, Charlotte, North Carolina 28202. DEC's telephone number is 800-488-3853.

DEC is an indirect, wholly owned subsidiary of Duke Energy Corporation. DEC, as initial servicer, will bill and collect storm recovery charges and will remit storm recovery charge collections daily to the indenture trustee according to the terms of the servicing agreement. Neither DEC nor Duke Energy Corporation nor any other affiliate (other than us) is an obligor of the Bonds. The Bonds will not be insured or guaranteed by DEC, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. There are currently no other retail electric providers operating in DEC's North Carolina service territory. See "The Servicing Agreement" in this prospectus.

DEC, as initial servicer, will be entitled to receive an annual servicing fee in an amount equal to 0.05% of the aggregate initial principal amount of the Bonds plus out-of-pocket expenses as described under the caption "The Servicing Agreement" in this prospectus. This servicing fee will be payable in equal installments on each semi-annual payment date, in arrears.

The indenture trustee will pay the servicing fee (together with any portion of the servicing fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the Bonds.

DEC, as administrator, will be entitled to receive an annual administration fee equal to $50,000 plus out-of-pocket expenses as further described herein under the caption "The Administration Agreement". This annual administration fee will be payable annually, in arrears. The indenture trustee will pay the administration fee (together with any portion of the administration fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the Bonds.

Our relationship with DEC:

On the issue date for the Bonds, DEC will sell storm recovery property to us pursuant to a sale agreement between us and DEC. DEC will service the storm recovery property pursuant to a servicing agreement between us and DEC. See "The Sale Agreement" and "The Servicing Agreement" in this prospectus.

Neither the Bonds nor the property securing the Bonds is an obligation of DEC or any of its affiliates, except for us.

The issuing entity's relationship with the NCUC:

The issuing entity is responsible to the NCUC, as provided in its organizational documents and the basic documents. Please read "The Issuing Entity" in this prospectus.

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Our managers:

The following is a list of our managers as of the date of this prospectus:

---

| | | | |
|:---|:---|:---|:---|
| **Name**  | **Age**  | **Title**  | **Background**  |
|  Michael P. Callahan  | <br> 50  | <br> Manager  | <br> Michael P. Callahan assumed his role as Senior Vice President & Treasurer of Duke Energy Corporation in 2024, after five years as State President for South Carolina. Prior to that, Mr. Callahan was Vice President of Investor Relations and in other roles since joining Duke Energy Corporation in 2002. |
|  Cynthia S. Lee  | <br> 58  | <br> Manager  | <br> Cynthia S. Lee has served as Senior Vice President, Chief Accounting Officer and Controller of Duke Energy Corporation since November 2024. Prior to that, Ms. Lee served as Vice President, Chief Accounting Officer and Controller from May 2021 to November 2024. Prior to that, Ms. Lee served as Director, Investor Relations since June 2019 and in various finance and accounting roles since joining Duke Energy Corporation in 2002. |
|  Bernard J. Angelo  | <br> 55  | <br> Independent <br> Manager  | <br> Bernard J. Angelo joined Global Securitization Service, LLC ("GSS") in April 1997 and has extensive experience in managing commercial paper and medium term note programs. In addition to his administrative skills, he has over twenty-seven years of experience in both the business and legal side of structured finance. He has been elected to and serves on the board of directors for a number of securitization programs. At GSS, Mr. Angelo has been active in assisting clients and their legal counsel during the structuring phase of their transactions as well as |

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| | | | |
|:---|:---|:---|:---|
| **Name**  | **Age**  | **Title**  | **Background**  |
|  |  |  | assimilating bank-sponsored commercial paper programs into the operating matrix at GSS. Prior to joining GSS, Mr. Angelo was an Assistant Vice President at Bankers Trust Company from January 1993 to April 1997 where he was responsible for oversight of the treasury and accounting functions on the Corporate Trust side of structured transactions managed by the bank. He has a B.S. in Finance from Siena College. Mr. Angelo serves as an independent director for our affiliates, Duke Energy Florida Project Finance, LLC, Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress NC Storm Funding LLC, and Duke Energy Progress SC Storm Funding LLC. |

---

Credit ratings:

The Bonds are expected to receive credit ratings from at least two nationally recognized statistical rating organizations. Please read "Ratings" in this prospectus.

Bond structure:

Sinking fund Bonds: Tranche , expected weighted average life years, Tranche , expected weighted average life years and Tranche , expected weighted average life years. The Bonds are scheduled to pay principal semi-annually and sequentially. See "Weighted Average Life and Yield Considerations for the Bonds" in this prospectus.

Average life profile:

Stable, meaning prepayment is not permitted and the aggregate payments of principal of and interest on the Bonds and the timing of such payments are not expected to change materially over the life of the Bonds under the stress cases analyzed under the heading "Weighted Average Life and Yield Considerations for the Bonds—Weighted Average Life Sensitivity" in this prospectus.

Optional redemption:

No optional redemption. Non-callable for the life of the Bonds.

Payment dates and interest accrual:

Semi-annually, and . Interest will be calculated on a 30/360 basis. The first scheduled payment date is , 2026 (the "**Initial Payment Date**").

Interest is due on each payment date for the Bonds, and principal for each **tranche** is due upon the final maturity date for that tranche. Failure to pay the entire outstanding principal amount of a tranche by the final maturity date for such tranche will result in an event of default. See "Description of the Storm Recovery Bonds—

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Interest Payments Generally", "—Principal Payments" and "—Events of Default; Rights Upon Event of Default" in this prospectus.

---

| | | |
|:---|:---|:---|
| **Tranche**  | **Scheduled Final <br> Payment Dates**  | **Final Maturity <br> Dates**  |

---

Indenture trustee:

U.S. Bank Trust Company, National Association will act as indenture trustee under the indenture pursuant to which the Bonds will be issued (the "**indenture**"). Please read "The Indenture Trustee" in this prospectus for a description of the trustee's duties and responsibilities under the indenture.

Minimum denominations of the

Bonds:

$2,000 and integral multiples of $1,000 in excess thereof, except for one bond, which may be of a smaller denomination.

Use of proceeds:

The issuing entity will use the proceeds of the offering to (i) purchase the storm recovery property from DEC, who in turn will use the proceeds it receives from the sale of the storm recovery property to pay down a portion of its outstanding debt, including our term loan that matures on November 1, 2026 and commercial paper and (ii) pay upfront bond issuance costs.

Background of transaction and the enabling legislation, the Financing Act:

In 2019, the North Carolina legislature enacted the **Financing Act**, codified as Section 62-172, North Carolina Statutes. The Financing Act allows public utilities to access lower-cost funds through storm recovery bonds pursuant to financing orders issued by the NCUC.

The Financing Act permits the NCUC to impose nonbypassable storm recovery charges on all future and existing customers receiving transmission or distribution service, or both, from DEC or its successors or assignees under NCUC-approved rate schedules or under special contracts sufficient to pay principal of and interest on the bonds and other administrative expenses of the offering. The NCUC governs the amount and terms for collections of these storm recovery charges through one or more financing orders issued to DEC and upon the issuance of the bonds these storm recovery charges may not be reduced, impaired, postponed, terminated or otherwise adjusted by the NCUC except as adjusted pursuant to the true-up mechanism described herein.

Storm recovery charges are nonbypassable by

customers:

The storm recovery charges are nonbypassable*,* consumption-based charges separate and apart from DEC's base rates; the storm recovery charges are to be paid by all existing and future customers receiving transmission or distribution service, or both, from DEC or its successors or assignees under NCUC-approved rate schedules or under special contracts. Such customers must pay storm recovery charges even if a customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in North Carolina.

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See "DEC's Financing Order—Storm Recovery Charges" in this prospectus.

Relationship to 2021 NC Storm Recovery Bonds:

In November 2021, Duke Energy Carolinas NC Storm Funding LLC, a special purpose wholly-owned subsidiary of DEC, issued $237.21 million aggregate principal amount of senior secured storm recovery bonds (the "**2021 NC Storm Recovery Bonds**") pursuant to the Financing Act to reimburse DEC for the North Carolina portion of previously incurred storm recovery costs relating to Hurricanes Florence and Michael and Winter Storm Diego, including the retirement of related debt. DEC currently acts as servicer with respect to the 2021 NC Storm Recovery Bonds. The 2021 NC Storm Recovery Bonds were issued by a separate issuing entity, are secured by and payable from a separate storm recovery property and were issued pursuant to a separate financing order.

Bondholders will have no recourse to the charges associated with the 2021 NC Storm Recovery Bonds and holders of the 2021 NC Storm Recovery Bonds will have no recourse to the storm recovery charges.

Initial storm recovery charge as a percentage of customer's total electricity bill:

The initial storm recovery charge is expected to represent approximately % of the total bill, as of , received by 1,000 kWh North Carolina residential customer of DEC.

The estimated aggregate initial storm recovery charge for (1) the Bonds, and (2) the 2021 NC Storm Recovery Bonds is expected to represent approximately % of the total DEC electric bill, as of , received by a 1,000 kWh residential customer of DEC.

North Carolina state pledge to

protect bondholder rights:

The State of North Carolina has pledged to the bondholders that it will not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • alter the provisions of the Financing Act that make the storm recovery charges imposed by the financing order irrevocable, binding, and nonbypassable charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • take or permit any action that impairs or would impair the value of storm recovery property or the security for the storm recovery bonds or revises the storm recovery costs for which recovery is authorized;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • impair the rights and remedies of bondholders, assignees, and other financing parties; or,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • except as authorized under the Financing Act with respect to the true-up mechanism, reduce, alter, or impair storm recovery charges that are to be imposed, billed, charged collected, and remitted for the benefit of the bondholders, assignees and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the storm recovery bonds have been paid and performed in full.

Nothing in this pledge will preclude limitation or alteration if full compensation is made by law for the full protection of the storm

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recovery charges collected pursuant to a financing order and of the bondholders and any assignee or financing party entering into a contract with the electric utility. Please read "Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions—Future North Carolina legislative action might attempt to invalidate the Bonds or the storm recovery property" in this prospectus.

This agreement is referred to as the "**state pledge**".

The Bonds will not be a debt or general obligation of the NCUC, the State of North Carolina, or any of its political subdivisions, agencies, or instrumentalities, and are not a charge on the full faith and credit or taxing power of the State of North Carolina or any other governmental agency or instrumentality.

NCUC mandates statutory true-up adjustments to the storm recovery charges:

The Financing Act permits and the financing order requires that we, or DEC, file with the NCUC at least semi-annually (and beginning twelve months prior to the last scheduled payment date of the latest maturing tranche, at least quarterly) a letter applying the true-up mechanism to be reviewed by the NCUC for any mathematical or clerical errors to correct for any overcollection or undercollection of the storm recovery charges and make any adjustments to ensure the recovery of revenues sufficient to provide for the timely payment of scheduled principal of and interest on the Bonds and other required amounts and charges payable in connection with the Bonds (such amounts, the "**periodic payment requirement**"). In addition to the semi-annual true-up adjustment, the servicer is authorized to make interim adjustments at any time for any reason to ensure the timely payment of the periodic payment requirement.

There is no limit or cap on level of storm recovery charges:

Under the financing order, DEC, as initial servicer, will impose on and collect from its existing and future retail customers in North Carolina receiving transmission or distribution service, or both, even if such customer elects to purchase electricity from an alternative supplier, Storm Recovery Charges in an amount sufficient to provide for the timely payment of principal of and interest on the Bonds when due and other financing costs payable in connection with the Bonds. See "Description of the Storm Recovery Bonds—Events of Default; Rights Upon Event of Default" in this prospectus.

Credit/security for the Bonds:

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In general, storm recovery property permits a storm recovery charge to be:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.

paid by all existing and future North Carolina customers receiving transmission or distribution service, or both, from DEC or its successors or assignees under NCUC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in North Carolina;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.

collected by DEC or any successor, as servicer, and remitted to the indenture trustee daily to provide for payments in respect of the bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.

adjusted at least semi-annually (and beginning twelve months prior to the last scheduled payment date of the latest maturing tranche, at least quarterly), and more frequently as needed to ensure recovery of revenues sufficient to pay principal of and interest on the bonds when due and other financing costs and other required amounts and charges payable in connection with the bonds.

The storm recovery property securing the Bonds consists of all rights and interests of DEC under the financing order. The storm recovery property is being sold to us by DEC in connection with the issuance of the Bonds. Storm recovery property is not a receivable, and the Bonds are not secured by a pool of receivables.

Credit enhancement for the Bonds will be provided by the true-up mechanism, as well as by the capital subaccount. The primary purpose of the excess funds subaccount is not to provide credit enhancement for the Bonds but to hold funds collected in amounts that were more than necessary to pay current debt service. However, amounts in the excess funds subaccount may be used to make debt service payments on the Bonds when needed.

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Transaction Parties:

The following chart shows the transaction parties and is a general summary of the transaction.

![[MISSING IMAGE: fc_approx-bw.jpg]](fc_approx-bw.jpg)

Allocation and flow of funds:

The following chart represents a general summary of the flow of funds.

![[MISSING IMAGE: fc_northcaro-bw.jpg]](fc_northcaro-bw.jpg)

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Generally, DEC's transmission and distribution customers will pay storm recovery charges and all other components of their monthly electricity bills to DEC.

On each payment date, the indenture trustee will, with respect to the storm recovery bonds, pay or allocate, all amounts on deposit in the general subaccount of the collection account in the following order of priority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.

payment of the indenture trustee's fees, expenses and outstanding indemnity amounts in an amount not to exceed annually $200,000 in the then current calendar year (the "**Trustee Cap**"); provided, however, that the Trustee Cap shall be disregarded and inapplicable upon acceleration following the occurrence of an event of default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.

payment of the servicing fee plus any unpaid servicing fees from prior payment dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.

payment of the administration fee to the extent due on that payment date and of the fees of the issuing entity's independent manager plus any unpaid administration or independent management fees from prior payment dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.

payment of all other ordinary periodic operating expenses not described above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.

payment of the interest then due, including any past-due interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.

payment of the principal required to be paid on the final maturity date for each tranche or as a result of acceleration upon an event of default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.

payment of the principal then scheduled to be paid in accordance with the expected sinking fund schedule, including any previously unpaid scheduled principal;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.

payment of any of our remaining unpaid operating expenses (including any fees, expenses and indemnity amounts owed to the indenture trustee but unpaid due to the limitation in clause (1) above) and any remaining amounts owed pursuant to the basic documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.

replenishment of any amounts drawn from the capital subaccount;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.

release to DEC of an amount equal to the rate of return on the amount contributed to the capital subaccount, including any portion of such rate of return for any prior payment date that has not yet been paid;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 11.

allocation of the remainder collected, if any, to the excess funds subaccount for future payments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.

after the Bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture.

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See "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will Be Allocated" in this prospectus. The servicing fee referred to in clause (2) is described in "The Servicing Agreement", and the amount of the administrative fee referred to in clause (3) above is described in "The Administration Agreement" below.

With respect to any operating expense payable by us (but only as described in clauses (1) through (4) above) that will become due and payable on a date other than a payment date, the administrator, on any business day, may direct the indenture trustee in writing to remit payment of such operating expense, in the amount specified in the written direction from amounts on deposit in the general subaccount, the excess funds subaccount and the capital subaccount in that order, all as specified in such written direction.

ERISA eligible:

Yes; please read "ERISA Considerations" in this prospectus.

1940 Act registration:

The issuing entity will be relying on an exclusion or exemption from the definition of "investment company" under the Investment Company Act of 1940, as amended (the "1940 Act") contained in Rule 3a-7 under the 1940 Act, although there may be additional exclusions or exemptions available to the issuing entity. The issuing entity is being structured so as not to constitute a "covered fund" for purposes of the Volcker Rule under the Dodd-Frank Act.

Credit risk retention requirements:

The Bonds are not subject to the 5% risk retention requirements imposed by Section 15G of the Securities Exchange Act of 1934 or the "**Exchange Act**" due to the exemption provided in Rule 19(b)(8) of the risk retention regulations in 17 C.F.R. Part 246 of the Exchange Act or "**Regulation RR**". For information regarding the requirements of the European Union Securitization Regulation as to risk retention and other matters, please read "Risk Factors—Other Risks Associated with the Purchase of the Bonds—Regulatory provisions affecting certain investors could adversely affect the liquidity of the Bonds" in this prospectus.

Conflicts of Interest:

Certain of the underwriters or their affiliates are lenders or may hold a portion of the short-term debt that DEC intends to repay from the proceeds it will receive from the sale of the storm recovery property. In such event, it is possible that one or more of the underwriters or their affiliates could receive more than 5% of the net proceeds of this offering, and in that case such underwriter could be deemed to have a conflict of interest under FINRA Rule 5121. In the event of any such conflict of interest, such underwriter would be required to conduct the distribution of Bonds in accordance with FINRA Rule 5121. If the distribution is conducted in accordance with FINRA Rule 5121, such underwriter would not be permitted to sell to an account over which it exercises discretionary authority without first receiving specific written approval from the account holder.

Our legal and covenant defeasance options:

The issuing entity may, by making certain deposits in trust and meeting specified conditions, at any time, terminate all of its obligations under the indenture and the series supplement with respect to the Bonds or its obligations to comply with some of the

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covenants in the indenture and the series supplement, including some of the covenants described under "Description of the Storm Recovery Bonds—Covenants of DEC NC Storm Funding II" in this prospectus. See "Description of the Storm Recovery Bonds—DEC NC Storm Funding II's Legal and Covenant Defeasance Options" in this prospectus.

Expected settlement date

Settling flat. DTC, Clearstream and Euroclear. , 20 .

Continuing disclosure: surveillance/internet-based information post issuance/ dedicated Web address:

Duke Energy Corporation, the parent of DEC, will establish a dedicated web address for the life of the Bonds. The principal transaction documents and other information concerning the storm recovery charges and security relating to the Bonds will be posted at such web address, which is currently located at www.duke-energy.com.

Pursuant to the indenture, the indenture trustee will make available on its website (currently located at https://pivot.usbank.com) to the holders of record of the Bonds regular reports prepared by the servicer containing information concerning, among other things, us and the collateral. Unless and until the Bonds are issued in definitive certificated form, the reports will be made available electronically on its website to The Depository Trust Company and to the beneficial owners of the Bonds. These reports will not be examined and reported upon by an independent public accountant. In addition, no independent public accountant will provide an opinion thereon. Please read "Description of the Storm Recovery Bonds—Reports to Bondholders" in this prospectus.

Risk factors:

#### You should consider carefully the risk factors beginning on page 21 of this prospectus before you invest in the Bonds.

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#### SUMMARY OF RISK FACTORS
Set forth below is a summary of the material risk factors which you should consider before deciding whether to invest in the Bonds. These risks can affect the timing or ultimate payment of the Bonds and value of your security. A description of such risk factors in greater details follows this summary.

*Limited Source of Payment for the Bonds*: The only source of funds for the Bonds is the storm recovery property and the other limited funds held by the indenture trustee. At the time of issuance of the Bonds, we will have no other assets and the Bonds are non-recourse to DEC. Therefore, the sources for repayment of the Bonds are limited. You must rely for payment of the Bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the securitization provisions of the Financing Act, the irrevocable financing order, collections of the storm recovery charges and funds on deposit in the related accounts held by the indenture trustee.

*Risks Associated with Potential Judicial, Legislative or Regulatory Actions:* The storm recovery property is an asset created under the Financing Act and through regulatory proceedings at the NCUC. Neither we nor DEC will indemnify you for any changes of law, whether as a result of Constitutional amendment, legislative enactment or any judicial proceedings.

True-up adjustment filings made with the NCUC may be challenged before the NCUC, resulting in delays in implementation of the true-up adjustment. Additionally, subject to any required NCUC approval, DEC may establish billing, collection and posting arrangements with customers which could impact the timing and amount of customer payments.

Also, a municipality may seek to acquire portions of DEC's service territory, and may dispute their obligation to pay the storm recovery charges, or even if obligated to do so, may fail to bill and remit the storm recovery charges on a timely basis.

*Servicing Forecasting Risks:* The collection of storm recovery charges on a timely and sufficient basis depends upon the ability of the servicer to accurately forecast customer usage. If the servicer inaccurately forecasts consumption or underestimates customer delinquencies for any reason, there could be a shortfall or material delay in storm recovery charge collections. Factors which might cause inaccurate projections of usage or customer delinquencies, include unanticipated weather conditions, cyber-attacks on DEC infrastructure, general economic conditions, and natural or man-made disasters. DEC's ability to collect storm recovery charges from customers may also be impacted by some of these same factors.

It may be difficult for us to find a replacement servicer should DEC default in its obligations. Assuming we can obtain a successive servicer, the successor servicer may be less effective in servicing the charges, potentially resulting in delay in collections, which might reduce the value of your investment.

*Risks Associated with the Unusual Nature of Storm Recovery Property:* The unusual nature of the storm recovery property makes it unlikely that, in the event of a default, the storm recovery property could be sold. Although the Bonds may be accelerated in the event of a default, as a practical matter, the storm recovery charges would likely not be accelerated.

*Risk Associated with Storms:* DEC's operations might be impacted by hurricanes, tropical storms or wind storms. Transmission, distribution and consumption of electricity might be interrupted temporarily, reducing the collections of storm recovery charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the DEC service area, which could cause the per-kWh storm recovery charge to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the state pledge, might be defended on the basis of public necessity.

*Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer:* In the event of a bankruptcy by DEC, you may experience a delay in payment or a default on payment of the Bonds due to various factors, including the comingling of storm recovery charges with other revenue of the servicer, a challenge to the characterization of the sale of the storm recovery property as a financing transaction, an effort to consolidate our assets and liabilities with those of DEC, a characterization of storm recovery

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payments to the indenture trustee as preferential transfers, the treatment of our claims against DEC as unsecured claims, and a general limitation on the remedies available in a bankruptcy, including the risk of an automatic stay.

*Other Risks:* Other risks associated with the purchase of the Bonds include the inadequacy of any indemnification obligations provided by DEC, the impact of a change of ratings or the issuance of an unsolicited rating, the absence of a secondary market for the Bonds, the issuance of additional storm recovery bonds or similar instruments creating greater burdens on the same customers, regulatory actions affecting certain investors and losses on investments held by the indenture trustee.

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#### RISK FACTORS
 *You should consider carefully all the information included in this prospectus, including the following factors and the statements contained under the "Cautionary Statement Regarding Forward-Looking Statements" in this prospectus, before you decide whether to invest in the Bonds:* 

#### You might experience material payment delays as a result of limited sources of payment for the Bonds and limited credit enhancement.
You may suffer material payment delays on your Bonds if the collateral securing your Bonds is insufficient to pay the accrued interest on and the principal amount of those Bonds in full. The only source of funds for payments of interest on and principal of the Bonds will be the collateral. The collateral for the Bonds will be limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the storm recovery property securing the Bonds, including the right to impose, bill, charge, collect and receive storm recovery charges and the right to implement the true-up mechanism in respect of the storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the funds on deposit in the accounts held by the indenture trustee and;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • our rights under various contracts described in this prospectus.

The Bonds will not be insured or guaranteed by DEC, including in its capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The Bonds will be nonrecourse obligations, secured only by the collateral. Delays in payment on the Bonds might result in a reduction in the market value of the Bonds and, therefore, the value of your investment in the Bonds.

The Bonds do not constitute a debt, liability or other obligation of, or interest in, DEC or any of its other affiliates (other than us). The Bonds are not a debt or general obligation of the State of North Carolina or any of its political subdivisions, agencies or instrumentalities, and are not a charge on the full faith and credit or taxing power of the State of North Carolina or any other governmental agency or instrumentality.

You must rely for payment of principal of and interest on the Bonds solely upon the Financing Act, state and federal constitutional rights to enforcement of the Financing Act, the financing order, collections of storm recovery charges and funds on deposit in the related accounts held pursuant to the indenture. If these amounts are not sufficient to make payments or there are delays in recoveries, you may experience material payment delays or incur a loss on your investment in the Bonds. Our organizational documents restrict our right to acquire other assets unrelated to the transactions described in this prospectus. Please read "The Issuing Entity" in this prospectus.

#### Risks Associated with Potential Judicial, Legislative or Regulatory Actions

#### We are not obligated to indemnify you for changes in law.
Neither we nor DEC will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Financing Act that may affect the value of your Bonds. DEC will agree in the sale agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal of, modification of or supplement to the Financing Act that would be materially adverse to us, the indenture trustee, or bondholders. However, DEC may not be able to take such action and, if DEC does take action, such action may not be successful. Although DEC or any successor seller might be required to indemnify us if legal action based on the law in effect at the time of the issuance of the Bonds invalidates the storm recovery property, such indemnification obligations do not apply for any changes in law after the date the Bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision. Please read "The Sale Agreement—Seller Representations and Warranties" and "The Servicing Agreement—Servicing Standards and Covenants" in this prospectus.

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#### Future legal action might challenge or invalidate the Financing Act or the financing order and materially adversely affect your investment.
The storm recovery property is created pursuant to the Financing Act and a financing order issued by the NCUC pursuant to the Financing Act. The Financing Act became effective on November 6, 2019 and was amended on November 20, 2024.

The Financing Act or any provisions thereof might be directly contested in courts or otherwise become the subject of litigation. In addition, the financing order or any provision thereof might be directly contested in courts or otherwise become the subject of litigation. As of the date of this prospectus, no such litigation has arisen; however, we cannot assure you that a lawsuit challenging the validity of the Financing Act or the financing order will not be filed in the future or that, if filed, such lawsuit will not be successful. If an invalidation of any relevant underlying legislative provision or financing order provision were to result from such litigation, you might lose some or all of your investment or you might experience delays in recovering your investment. See "The Storm Recovery Property and the Financing Act" and "DEC's Financing Order" in this prospectus.

Other states have passed legislation similar to the Financing Act to authorize recoveries by utilities of specified costs, including storm recovery costs, environmental control costs, or costs associated with deregulation of the electricity market, and some of those laws have been challenged by judicial actions or utility commission proceedings. To date, none of those challenges have succeeded, but future judicial challenges might be made. An unfavorable decision challenging legislation similar to the Financing Act would not automatically invalidate the Financing Act or the financing order, but it might provoke a challenge to the Financing Act or the financing order, establish a legal precedent for a successful challenge to the Financing Act or the financing order or heighten awareness of the political and other risks of the Bonds, and in that way may limit the liquidity and value of the Bonds. Therefore, legal activity in other states might indirectly affect the value of your investment in the Bonds.

#### Future North Carolina legislative action might attempt to invalidate the Bonds or the storm recovery property.
Under the Financing Act, the State of North Carolina has pledged not to (i) alter the provisions of the Financing Act that make the storm recovery charges imposed by the financing order irrevocable, binding and nonbypassable, (ii) take or permit any action that impairs the value of the storm recovery property or revises the storm recovery costs for which recovery is authorized or, (iii) except as provided in the true-up mechanism, reduce, alter, or impair storm recovery charges that are to be imposed, collected, and remitted for the benefit of the bondholders and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the storm recovery bonds have been paid and performed in full. For a description of this state pledge, see "The Storm Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds—The Financing Act Contains a State Pledge" in this prospectus. Despite the state pledge, the North Carolina legislature might attempt to repeal the Financing Act, or attempt to amend the Financing Act, or as described below, the NCUC might take certain actions that impair the storm recovery property. As of the date of this prospectus, neither we nor DEC is aware of any pending legislation in the North Carolina legislature that would affect any provisions of the Financing Act. To date, there have been no reported U.S. federal or North Carolina cases addressing the repeal or amendment of securitization provisions analogous to those contained in the Financing Act. There have been cases in which U.S. federal courts have applied the Contract Clause of the United States Constitution to strike down legislation regarding similar matters, such as legislation reducing or eliminating taxes, public charges or other sources of revenues servicing other types of bonds issued or contracts entered into by public instrumentalities or private issuers, or otherwise substantially impairing or eliminating the security for bonds or other indebtedness or contractual obligations.

Hunton Andrews Kurth LLP ("Hunton"), counsel to DEC and DEC NC Storm Funding II, will deliver an opinion with respect to applicable federal constitutional principles relating to the impairment of contracts, that (i) in a properly prepared and presented case, a reviewing court of competent jurisdiction would conclude that the state pledge constitutes a contractual relationship between the bondholders and the State of North Carolina and (ii) in the event that the North Carolina legislature passes any law (or the NCUC exercising legislative powers takes any action) prior to the time that the Bonds and related financing

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costs are fully paid and discharged that in either case alters, impairs, or reduces the value of the storm recovery property or the storm recovery charges, then, absent a demonstration by the State of North Carolina that such action or inaction is necessary to further a significant and legitimate public purpose, and upon a finding by the court that an evident and more moderate course would serve the State's purposes equally well, the bondholders (or the indenture trustee acting on their behalf) could successfully challenge under the Contract Clause of the U.S. Constitution, against the constitutionality of any such action or inaction that limits, alters, impairs, or reduces the value of the storm recovery property or the storm recovery charges prior to the time that the Bonds are fully paid and discharged, provided that the repeal or amendment or the action or inaction would substantially impair the rights of the owners of the storm recovery property or the bondholders. The relevant case law also indicates that the State's justification would be subjected to a higher degree of scrutiny, and that the State would bear a more substantial burden, if the legislative action impairs a contract to which the State is a party (which the depositor believes to be the case here), as contrasted to a contract solely between private parties. It may be possible for the North Carolina legislature to repeal or amend the Financing Act or for the NCUC to amend or revoke the financing order notwithstanding the State Pledge, if the legislature or the NCUC acts in order to serve a significant and legitimate public purpose, such as protecting the public health and safety or responding to a national or regional catastrophe affecting DEC's service territory, or if the legislature otherwise acts in the valid exercise of the State's police power, if an evident and more moderate course would not serve the State's purposes equally well. The issuing entity will file a copy of the Opinion as an exhibit to an amendment to the registration statement of which this prospectus is a part, or to one of the issuing entity's periodic filings with the SEC.

Preliminary injunctive relief should be available under federal law to delay implementation of any such action or inaction hereafter taken and determined to limit, alter, impair, or reduce the value of the storm recovery property or the storm recovery charges so as to cause such an impairment in violation of the Contract Clause of the U.S. Constitution, and, upon final adjudication of a claim challenging any such action or inaction, permanent injunctive relief should be available under federal law to prevent implementation thereof.

In addition, any action of the North Carolina legislature adversely affecting the storm recovery property or the ability to collect storm recovery charges may be considered a taking under the United States Constitution or the Law of the Land Clause of the North Carolina Constitution. Hunton has advised us that it is not aware of any U.S. federal or North Carolina court cases addressing the applicability of the Takings Clause of the United States Constitution or the Law of the Land Clause of the North Carolina Constitution in a situation analogous to that which would be involved in an amendment or repeal of the Financing Act. It is possible that a court would decline even to apply a Takings Clause or Law of the Land Clause analysis to a claim based on an amendment or repeal of the Financing Act, since, for example, a court might determine that a Contract Clause analysis rather than a Takings Clause or Law of the Land Clause analysis should be applied. Hunton expects to deliver an opinion to the effect that a court of competent jurisdiction, in a properly prepared and presented case, would hold that the Takings Clause of the U.S. Constitution and the Law of the Land Clause of the North Carolina Constitution would likely require the State of North Carolina to pay just compensation to the bondholders if a court determines that a repeal or amendment of the Financing Act, or any other action taken by the State of North Carolina in contravention of the state pledge, (a) completely deprived the bondholders of all economically beneficial use of the storm recovery property or (b) unduly interfered with the reasonable expectations of the bondholders arising from their investment in the Bonds. In determining what is an undue interference, a court would consider the nature of the governmental action, the economic impact of the governmental action on the bondholders and the extent to which the governmental action interferes with distinct investment-backed expectations of the bondholders. Even if such State action or inaction is treated as a taking and the State of North Carolina provides you with an amount deemed to be full compensation, that amount might not be sufficient for you to fully recover your investment.

Further, nothing in the state pledge precludes any limitation or alteration of the Financing Act or a financing order if full compensation is made by law for the full protection of the storm recovery charges collected pursuant to a financing order and of the holders of the Bonds. It is unclear what "full compensation" and "full protection" would be afforded to holders of the Bonds by the State of North Carolina if such limitation or alteration were attempted. Accordingly, no assurance can be given that any such provision would not adversely affect the market value of the Bonds, or the timing or receipt of payments with respect to such Bonds.

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We cannot assure you that a repeal of or amendment to the Financing Act will not be sought or adopted or that any action or inaction by the State of North Carolina adverse to your investment in the Bonds will not occur. The servicer has agreed to take legal or administrative action, including instituting legal action, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of or amendment to the Financing Act or a modification of the financing order or storm recovery property. However, enforcement of any rights against the State of North Carolina or the NCUC under the state pledge may be subject to the exercise of judicial discretion in appropriate cases and to the limitations on legal remedies against the State of North Carolina and local governmental entities in North Carolina. These limitations might include, for example, the necessity to exhaust administrative remedies prior to bringing suit in a court, or limitations on type and locations of courts in which the State of North Carolina or the NCUC may be sued. See "The Servicing Agreement—Servicing Standards and Covenants" in this prospectus. However, we cannot assure that the servicer would be able to take this action or that this action would be successful.

Except as described in "The Sale Agreement—Indemnification" in this prospectus, neither DEC, nor any of its successors, assignees or affiliates will indemnify you for any change in law, including any amendment or repeal of the Financing Act, that might affect the value of the Bonds.

#### The NCUC might attempt to take actions which might reduce the value of your investment.
The Financing Act provides that the financing order issued to DEC is irrevocable upon the transfer of the storm recovery property to an assignee or the issuance of the Bonds, whichever is earlier, and is not subject to amendment, modification or termination by subsequent action of the NCUC, except for the periodic true-up adjustments. Apart from the financing order, the NCUC retains the power to adopt, revise or rescind rules or regulations affecting DEC or a successor utility. The NCUC also retains the power to interpret and implement the financing order. Any new or amended regulations or orders by the NCUC for example, could affect the ability of the servicer to collect the storm recovery charges in full and on a timely basis. The servicer has agreed to take legal or administrative action to resist any NCUC rule, regulation or decision that would violate the state pledge. We cannot assure you that the servicer would be successful in its efforts. Thus, future NCUC rules, regulations or decisions might adversely affect the rating of the Bonds, their price or the rate of storm recovery charge collections and, accordingly, the amortization of Bonds and their weighted average lives. As a result, you could suffer a loss of your investment.

The servicer is required to file with the NCUC, on our behalf, periodic true-up adjustments of the storm recovery charges. Under the irrevocable financing order, the NCUC will act to administratively approve the requested adjustment (including, if applicable, the correction of any mathematical or clerical error in such calculations) within 30 days of the date of the request for adjustment. However, true-up adjustments could be challenged or might not be approved in a timely manner, and such an event might adversely affect the market perception and valuation of the Bonds. Also, any such challenge or delay in approving a true-up adjustment could result in costly and time-consuming litigation, and such litigation could result in a shortfall or material delay in storm recovery charge collections. Please read "DEC's Financing Order—True-Up Mechanism" and "The Servicing Agreement—The NCUC's True-Up Mechanism" in this prospectus.

 ***The servicer may not fulfill its obligations to act on behalf of the bondholders to protect bondholders from actions by the NCUC or the State of North Carolina, or the servicer may be unsuccessful in any such attempt.***

The servicer will agree in the servicing agreement to take any action or proceeding necessary to compel performance by the NCUC and the State of North Carolina of any of their obligations or duties under the Financing Act or the financing order, including any actions reasonably necessary to block or overturn attempts to cause a repeal or modification of the Financing Act or the financing order. The servicer, however, may not be able to take those actions for a number of reasons, including due to legal or regulatory restrictions, financial constraints and practical difficulties in successfully challenging any such legislative enactment or constitutional amendment. Additionally, any action the servicer is able to take may not be successful. Any such failure to perform its obligations or to successfully compel performance by the NCUC or the State of North Carolina could negatively affect bondholders' rights and result in a loss of their investment.

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#### A municipal entity might assert the right to acquire portions of DEC's electric distribution facilities and avoid payment of the storm recovery charges.
A municipality might bring a proceeding and allege that it has the right to acquire portions of an electric utility's electric distribution facilities through the power of eminent domain for use as part of municipally-owned utility systems. If a municipality were to bring such a proceeding against DEC, DEC would first contest the municipality's right to utilize eminent domain to acquire DEC's electric distribution facilities. If the municipality was successful in such a proceeding, then after the final, non-appealable judgment, DEC would adhere to the covenant described below in the servicing agreement. A municipality may also seek to acquire portions of an electric utility's electric distribution facilities by exercising a unilateral contract option to request a valuation and forced sale of the electric utility's electric distribution facilities. There can be no assurance that one or more municipalities will not seek to acquire some or all of DEC's electric distribution facilities while the Bonds remain outstanding. The Financing Act specifies that storm recovery charges approved by a financing order shall be collected by an electric utility as well as its "successors or assignees." In the servicing agreement, DEC has covenanted to assert in an appropriate forum that any municipality that acquires any portion of DEC's electric distribution facilities by eminent domain or by exercising a unilateral contract option, must be treated as a successor to DEC under the Financing Act and the financing order and that customers in such municipalities remain responsible for payment of storm recovery charges. However, the involved municipality might assert that it should not be treated as a successor to DEC for these purposes and that its distribution customers are not responsible for payment of storm recovery charges. In any case, DEC cannot assure you that the storm recovery charges will be collected from customers of municipally-owned utilities who were formerly customers of DEC and that such an occurrence might not affect the timing or receipt of payments with respect to your Bonds.

#### Neither DEC NC Storm Funding II nor DEC is obligated to indemnify you for changes in law.
Neither we nor DEC nor any of their successors, assignees or affiliates will indemnify you for any changes in the law, including any federal preemption or repeal or amendment of the Financing Act that might affect the value of your Bonds. DEC, as servicer, will agree in the servicing agreement to institute any action or proceeding as may be reasonably necessary to block or overturn any attempts to cause a repeal, modification or amendment to the Financing Act that would be materially adverse to us, the indenture trustee or bondholders. However, we cannot assure you that DEC would be able to take this action or that this action would be successful. Although DEC or any successor assignee might be required to indemnify us if legal action based on the law in effect at the time of the issuance of the Bonds invalidates the storm recovery property, such indemnification obligations do not apply for any changes in law after the date the Bonds are issued, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision. See "The Sale Agreement—Seller Representations and Warranties" and "The Servicing Agreement—Servicing Standards and Covenants" in this prospectus.

#### Servicing Forecasting Risks

#### Inaccurate forecasting of electric consumption or collections might reduce scheduled payments on the Bonds.
The storm recovery charges are calculated based on forecasted customer usage. The amount and the rate of storm recovery charge collections will depend in part on actual electricity consumption and the timing of collections and write-offs. The financing order approves the methodology by which the storm recovery charges will be calculated and adjusted from time to time by the servicer pursuant to true-up adjustment letters submitted to the NCUC as described below, which includes the allocation of cost responsibility among customer rate classes based upon the cost responsibilities approved in DEC's most recently filed rate case. If the servicer inaccurately forecasts electricity consumption (including forecasts of electric consumption by customer rate classes)or underestimates customer delinquency or write-offs when setting or adjusting the storm recovery charges, there could be a shortfall or material delay in storm recovery charge collections, which might result in missed or delayed payments of principal and interest and lengthened weighted average life of the Bonds. Please read "DEC's Financing Order—True-Up Mechanism" and "The Servicing Agreement—The NCUC's True-Up Mechanism" in this prospectus.

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Inaccurate forecasting of electricity consumption by the servicer might result from, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • unanticipated weather or economic conditions, resulting in less electricity consumption than forecast;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • general economic conditions, such as pandemic health event similar to that resulting from COVID-19, and their collateral consequences, including the disruption of global supply chains or the economic activity in DEC's service territories causing customers to migrate from DEC's service territory or reduce their electricity consumption;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the occurrence of a natural disaster, such as a hurricane, wind storm, wild fire or an act of war or terrorism, cyber-attack or other catastrophic event, including pandemics, unexpectedly disrupting electrical service and reducing electricity consumption;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • unanticipated changes in the market structure of the electric industry;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • large customers unexpectedly ceasing business or departing DEC's service territory;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • dramatic and unexpected changes in energy prices resulting in decreased electricity consumption;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • customers consuming less electricity than anticipated because of increased energy prices, unanticipated increases in conservation efforts, unanticipated increases in electric consumption efficiency, or if electricity by data centers is less than currently projected;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • differences or changes in forecasting methodology; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • large customers switching to alternative sources of energy, including self-generation or co-generation of electric power in some cases without using DEC's transmission or distribution system. Self-generators that receive no transmission or distribution service from DEC are not liable for the storm recovery charge. The Financing Act and financing order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

Inaccurate forecasting of delinquencies or write-offs by the servicer could result from, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • unexpected deterioration of the economy, the occurrence of a natural disaster, an act of war or terrorism or other catastrophic events, including pandemics, causing greater write-offs than expected or forcing DEC or a successor utility to grant additional payment relief to more customers;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • an unexpected change in law that makes it more difficult for DEC or a successor distribution company to terminate service to nonpaying customers, or that requires DEC or a successor to apply more lenient credit standards for customers; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the unexpected introduction into the energy markets, as a result of a fundamental change in the regulation of electric utilities in North Carolina, of alternative energy suppliers who are authorized to collect payments arising from the storm recovery charges, but who may fail to remit customer charges to the servicer in a timely manner.

#### Your investment in the Bonds depends on DEC or its successors or assignees acting as servicer of the storm recovery property.
DEC, as servicer, will be responsible for, among other things, calculating, billing, collecting and posting the storm recovery charges from customers, submitting requests to the NCUC to adjust these charges, monitoring the collateral for the Bonds and taking certain actions in the event of non-payment by a customer. The indenture trustee's receipt of collections in respect of the storm recovery charges, which will be used to make payments on Bonds, will depend in part on the skill and diligence of the servicer in performing these functions. The systems that the servicer has in place for storm recovery charge billings, collections and postings, as the same may be modified by any applicable current or future NCUC regulations, might, in particular circumstances, cause the servicer to experience difficulty in performing these functions in a timely and completely accurate manner. If the servicer fails to make collections for any reason, then the servicer's payments to the indenture trustee in respect of the storm recovery charges might be delayed or reduced. In that event, our payments on the Bonds might be delayed or reduced.

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 ***If DEC NC Storm Funding II needs to replace DEC as the servicer, DEC NC Storm Funding II may experience difficulties finding and using a replacement servicer.***

If DEC ceases to service the storm recovery property related to the Bonds, it might be difficult to find a successor servicer. Also, any successor servicer might have less experience and ability than DEC and might experience difficulties in collecting storm recovery charges and determining appropriate adjustments to the storm recovery charges and billing and/or payment arrangements may change, resulting in delays or disruptions of collections. A successor servicer might not be willing to perform except for fees higher than those approved in the financing order and might charge fees that, while permitted under the financing order, are substantially higher than the fees paid to DEC as servicer. Although a true-up adjustment would be required to allow for the increase in fees, there could be a gap between the incurrence of those fees and the implementation of a true-up adjustment to adjust for that increase that might adversely affect distributions to bondholders. In the event of the commencement of a case by or against the servicer under Title 11 of the United States Code, as amended, or the Bankruptcy Code, or similar laws, we and the indenture trustee might be prevented from effecting a transfer of servicing due to operation of the Bankruptcy Code. Any of these factors might delay the timing of payments and reduce the value of your investment.

Under the DEC intercreditor agreement to be entered into at the time of issuance of the Bonds among DEC, us, Duke Energy Carolinas NC Storm Funding LLC, the indenture trustee and the indenture trustee of the 2021 NC Storm Recovery Bonds, replacement of the servicer would require the agreement of the indenture trustee of the 2021 NC Storm Recovery Bonds . In the event of a default by the servicer under the servicing agreement, if the respective indenture trustees are unable to agree on a replacement servicer, the indenture trustee would not be able to replace DEC or any successor as servicer. Any of these events could adversely affect the billing, collection and posting of the storm recovery charges and the value of your investment in the Bonds. See "The Servicing Agreement" in this prospectus.

In addition to the above, it is possible that DEC may, in the future, cause other subsidiaries to issue other securities, similar to the Bonds that are backed by charges owing from customers or similar types of property. DEC has covenanted in the sale agreement that, in the event of any issuance of that sort, it will also enter into a joinder to, or amend, the intercreditor agreements with the indenture trustee and the trustees for those other issuances, which would provide that the servicer for the Bonds and those other issuances must be one and the same entity. Any expansion of the intercreditor agreements to include those subsequent issuances could further impair the ability of the indenture trustee to appoint a successor servicer in the event of a servicer default.

#### Changes to billing, collection and posting practices might reduce the value of your investment in the Bonds.
The financing order specifies the methodology for determining the amount of the storm recovery charges we may impose. However, subject to any required NCUC approval, the servicer may set its own billing, collection and posting arrangements with customers from whom it collects storm recovery charges, provided that these arrangements comply with any applicable NCUC customer safeguards and the provisions of the servicing agreement. For example, to recover part of an outstanding bill, the servicer may agree to extend a customer's payment schedule, including the storm recovery charges. Also, subject to any required NCUC approval, the servicer may change billing, collection and posting practices, which might adversely impact the timing and amount of customer payments and might reduce storm recovery charge collections, thereby limiting our ability to make scheduled payments on the Bonds. Separately, the NCUC might require changes to these practices. While the true-up adjustment is designed to ensure timely payment on the Bonds, any changes in billing, collection and posting practices or regulations might make it more difficult for the servicer to collect the storm recovery charges and adversely affect the value of your investment in the Bonds.

#### Cyberattacks and data security breaches could adversely affect DEC's businesses.
Cybersecurity risks have increased in recent years as a result of the proliferation of new technologies and the increased sophistication, magnitude and frequency of cyberattacks and data security breaches. DEC relies on the continued operation of sophisticated digital information technology systems and network infrastructure, which are part of an interconnected grid. Additionally, connectivity to the internet continues to increase through grid modernization and other operational excellence initiatives. Because of the critical

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nature of the infrastructure, increased connectivity to the internet and technology systems' inherent vulnerability to disability or failures due to hacking, viruses, acts of war or terrorism or other types of data security breaches, DEC faces a heightened risk of cyberattack from foreign or domestic sources and have been subject, and will likely continue to be subject, to attempts to gain unauthorized access to information and/or information systems or to disrupt utility operations through computer viruses and phishing attempts either directly or indirectly through its material vendors or related third parties. In the event of a significant cybersecurity breach on either DEC or with one of our material vendors or related third parties, DEC could (i) have business operations disrupted, including the disruption of the operation of our assets and the power grid, collecting revenues or the recording, processing and/or reporting billing and collection information correctly, (ii) experience substantial loss of revenues, repair and restoration costs, penalties and costs for lack of compliance with relevant regulations, implementation costs for additional security measures to avert future cyberattacks and other financial loss and (iii) be subject to increased regulation, litigation and reputational damage all of which could materially affect DEC's ability to bill and collect storm recovery charges or otherwise service the storm recovery property.

#### It might be difficult for successor servicers to collect the storm recovery charge from DEC's customers.
Any successor servicer may bring an action against a customer for non-payment of the storm recovery charge, but only a successor servicer that is a successor electric utility may terminate service for failure to pay the storm recovery charge. Partial payment of monthly electric bills shall be allocated pro rata among the storm recovery charge and other charges on the bill. A successor servicer that does not have the threat of termination of service available to enforce payment of the storm recovery charge would need to rely on the successor electric utility to threaten to terminate service for nonpayment of other portions of monthly electric utility bills. This inability might reduce the value of your investment.

#### Risk Associated with the Unusual Nature of the Storm Recovery Property
 ***Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the Bonds before maturity might result in your investment being repaid either earlier or later than expected.***

Under the Financing Act, the indenture and the series supplement, the indenture trustee or the bondholders have the right to foreclose or otherwise enforce the lien on the storm recovery property securing the Bonds. However, in the event of foreclosure, there is likely to be a limited market, if any, for the storm recovery property. Therefore, foreclosure might not be a realistic or practical remedy. Moreover, although principal of the Bonds will be due and payable upon acceleration of the Bonds before maturity, we do not anticipate that the storm recovery charges will be adjusted beyond the periodic payment requirement and therefore storm recovery charges likely would not be sufficient to pay principal due and payable upon such an acceleration, and the nature of our business will result in principal of the Bonds being paid as funds become available. See "DEC's Financing Order—True-Up Mechanism" in this prospectus. If there is an acceleration of the Bonds, all of the Bonds will be paid pro rata; therefore, some Bonds might be paid earlier than expected and some Bonds might be paid later than expected.

#### Risk Associated with Storms

#### Storm damage to DEC's operations might impair payment of the Bonds
DEC's operations might be impacted by hurricanes, tropical storms, winter storms or wind storms. Transmission, distribution and consumption of electricity might be interrupted temporarily, reducing the collections of storm recovery charges. There might be longer-lasting weather-related adverse effects on residential and commercial development and economic activity in the DEC service area, which could cause the per-kWh storm recovery charge to be greater than expected. Legislative action adverse to the bondholders might be taken in response, and such legislation, if challenged as a violation of the state pledge, might be defended on the basis of public necessity. Please read "The Storm Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds—The Financing Act Contains a State Pledge" and "Risk Factors—Risks Associated with Potential Judicial,

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Legislative or Regulatory Actions—Future North Carolina legislative action might attempt to invalidate the Bonds or the storm recovery property" in this prospectus.

#### Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer
For a more detailed discussion of the following bankruptcy risks, please read "Bankruptcy and Creditors' Rights Issues" in this prospectus.

 ***The servicer will commingle the storm recovery charges with other revenues it collects, which might obstruct access to the storm recovery charges in case of the servicer's bankruptcy and reduce the value of your investment in the Bonds.***

DEC, as servicer, will be required to remit estimated storm recovery charge collections to the indenture trustee no later than the second servicer business day of receipt. Prior to remitting such funds to the indenture trustee, the servicer will not segregate the storm recovery charges from the other funds it collects from customers, including amounts relating to the 2021 NC Storm Recovery Bonds or its general funds. The storm recovery charges will be estimated and segregated only when the servicer remits them to the indenture trustee.

Despite this requirement, the servicer might fail to remit the full amount of the storm recovery charges payable to the indenture trustee or might fail to do so on a timely basis. This failure, whether voluntary or involuntary, might materially reduce the amount of storm recovery charge collections available to make payments on the Bonds.

Absent a default under the servicing agreement, DEC will be required to remit estimated storm recovery charges to the indenture trustee. While DEC will be responsible for identifying and calculating the actual amount of storm recovery charges in the event of a default under the servicing agreement, it may be difficult for DEC to identify such charges, given existing limitations in its billing system.

The Financing Act provides that the priority of a lien and security interest perfected in recovery property is not impaired by the commingling of the funds arising from storm recovery charges with any other funds. In a bankruptcy of the servicer, however, a bankruptcy court might rule that federal bankruptcy law takes precedence over the Financing Act and might decline to recognize our right to collections of the storm recovery charges that are commingled with other funds of the servicer as of the date of bankruptcy. If so, the collections of the storm recovery charges held by the servicer as of the date of bankruptcy would not be available to pay amounts owing on the Bonds. In this case, we would have only a general unsecured claim against the servicer for those amounts. This decision could cause material delays in payments of principal or interest, or losses, on your Bonds and could materially reduce the value of your investment in the Bonds.

#### Bankruptcy of DEC or any successor or assignee could result in losses or delays in payments on the Bonds.
DEC, as seller, will represent and warrant in the sale agreement that the transfer of the storm recovery property to us under that sale agreement is a valid sale and assignment of that storm recovery property from the seller to us. The seller will also represent, warrant, and covenant that it will take the appropriate actions under the Financing Act to perfect a backup grant in the sold storm recovery property. The Financing Act provides that the transactions described in the sale agreement shall constitute a sale of the storm recovery property to us, and the seller and we will treat the transaction as a sale under applicable law, although for financial reporting and tax reporting purposes the transaction will be treated as debt of the seller. If the seller were to become a debtor in a bankruptcy case, and a party in interest (including the seller itself) were to take the position that the sale of the storm recovery property to us should be recharacterized as the grant of a security interest in such recovery property to secure a borrowing of the seller, delays in payments on the Bonds could result. If a court were to adopt such position, then further delays as well as reductions in payments on the Bonds could result.

Pursuant to the Financing Act and the financing order, upon the sale of the storm recovery property, the storm recovery property is created as a present property right, and it thereafter continuously exists as property for all purposes. Nonetheless, if the seller were to become the debtor in a bankruptcy case, a party

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in interest (including the seller itself) may take the position that, because the storm recovery charges are usage-based charges, recovery property comes into existence only as customers use electricity. If a court were to adopt this position, no assurance can be given that the court would not also rule that any storm recovery property relating to electricity consumed after the commencement of the seller's bankruptcy case was not required to be transferred to us, thus resulting in delays or reductions of payments on the Bonds.

A bankruptcy court generally follows state property law on issues such as those addressed by the provisions described above. However, a bankruptcy court has authority not to follow state law if it determines that the state law is contrary to a paramount federal bankruptcy policy or interest. If a bankruptcy court in a bankruptcy of DEC refused to enforce one or more of the State of North Carolina's property law provisions described above for this reason, the effect of this decision on you as a bondholder would be similar to the treatment you would receive in a bankruptcy of DEC if the Bonds had been issued directly by DEC, including without limitation possibly causing material delays in payment of, or losses on, your Bonds and possibly materially reducing the value of your investment in the Bonds. Specific examples of possible effects are set forth below. A decision by the bankruptcy court that, despite our separateness from DEC, our assets and liabilities and those of DEC should be substantively consolidated would have a similar effect on you as a bondholder.

The Issuing Entity has taken steps together with DEC, as the seller, to reduce the risk that in the event DEC or an affiliate of DEC were to become the debtor in a bankruptcy case, a court would order that our assets and liabilities be substantively consolidated with those of DEC or an affiliate. Such steps include, without limitation, provisions in our limited liability company agreement concerning entity separation and requiring an independent manager. Nonetheless, these steps might not be completely effective, and thus if DEC or an affiliate of DEC were to become a debtor in a bankruptcy case, a court may order that our assets and liabilities be substantively consolidated with those of DEC or the affiliate. This might cause material delays in payment of, or losses on, your Bonds and might materially reduce the value of your investment in the Bonds. For example:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • without permission from the bankruptcy court, the indenture trustee might be prevented from taking actions against DEC or recovering or using funds on your behalf or replacing DEC as the servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the bankruptcy court might order the indenture trustee to exchange the storm recovery property for other property, which might be of lower value;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • tax or other government liens on DEC's property that arose after the transfer of the storm recovery property to us might nevertheless have priority over the indenture trustee's lien and might be paid from storm recovery charge collections before payments on your Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the indenture trustee's lien might not be properly perfected in storm recovery property collections that were commingled with other funds of DEC collected from customers as of the date of DEC's bankruptcy, or might not be properly perfected in all of the storm recovery property, including, without limitation, if all perfection requirements are not met, and the lien might therefore be set aside in the bankruptcy, with the result that your Bonds would represent only general unsecured claims against DEC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the bankruptcy court might rule that neither our property interest nor the indenture trustee's lien extends to storm recovery charges in respect of electricity consumed after the commencement of DEC's bankruptcy case, with the result that your Bonds would represent only general unsecured claims against DEC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we and DEC might be relieved of the obligation to make any payments on your Bonds during the pendency of the bankruptcy case and might be relieved of any obligation to pay interest accruing after the commencement of the case;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC might be able to alter the terms of your Bonds as part of its plan of reorganization;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the bankruptcy court might rule that the storm recovery charges should be used to pay a portion of the cost of providing electric service;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the bankruptcy court might rule that the remedy provisions of the sale agreement are unenforceable, leaving us with an unsecured claim of actual damages against DEC which might be expensive and difficult to prove;

Furthermore, if DEC enters bankruptcy proceedings, it might be permitted to stop acting as servicer with consent of the NCUC, and it may be difficult to find a third party to act as servicer. The failure of the servicer to perform its duties or the inability to find a successor servicer might cause payment delays or losses on your investment in the Bonds. Also, the mere fact of a servicer or seller bankruptcy proceeding might have an adverse effect on the resale market for the Bonds and on the value of the Bonds.

 ***The sale of the storm recovery property might be construed as a financing and not a sale in a case of DEC's bankruptcy which might delay or limit payments on the Bonds.***

The Financing Act provides that the characterization of a transfer of storm recovery property as a sale or other absolute transfer will not be affected or impaired by treatment of the transfer as a financing for federal or state tax purposes or financial reporting purposes. We and DEC will treat the transaction as a sale under applicable law, although for financial reporting and income and franchise tax purposes the transaction is intended to be treated as a financing. In the event of a bankruptcy of DEC, a party in interest in the bankruptcy might assert that the sale of the storm recovery property to us was a financing transaction and not a "sale or other absolute transfer" and that the treatment of the transaction for financial reporting and tax purposes as a financing and not a sale lends weight to that position. If a court were to characterize the transaction as a financing, we expect that we would, on behalf of ourselves and the indenture trustee, be treated as a secured creditor of DEC in the bankruptcy proceedings, although a court might determine that we only have an unsecured claim against DEC. Even if we had a security interest in the storm recovery property, we would not likely have access to the related storm recovery charge collections during the bankruptcy and would be subject to the risks of a secured creditor in a bankruptcy case, including the possible bankruptcy risks described in the immediately preceding risk factor. As a result, repayment of the Bonds might be significantly delayed and a plan of reorganization in the bankruptcy might permanently modify the amount and timing of payments to us of the related storm recovery charge collections and therefore the amount and timing of funds available to us to pay bondholders.

 **If the servicer enters bankruptcy proceedings, transfers of the storm recovery charges by the servicer prior to the date of bankruptcy might constitute preferences, which means these funds might be unavailable to pay amounts owing on the Bonds.** 

In the event of a bankruptcy of the servicer, a party in interest might take the position that the remittance of funds prior to bankruptcy of the servicer, pursuant to the servicing agreement, constitutes a preference under bankruptcy law if the remittance of those funds was deemed to be paid on account of a preexisting debt. If a court were to hold that the remittance of funds constitutes a preference, any such remittance within 90 days of the filing of the bankruptcy petition could be avoidable, and the funds could be required to be returned to the bankruptcy estate of the servicer. To the extent that storm recovery charges have been commingled with the general funds of the servicer, the risk that a court would hold that a remittance of funds was a preference would increase. Also, the issuing entity may be considered an "insider" of the servicer. If the issuing entity is considered to be an "insider" of the servicer, any such remittance to the issuing entity made within one year of the filing of the bankruptcy petition could be avoidable as well if the court were to hold that such remittance constitutes a preference. In either case, the issuing entity or the trustee would merely be an unsecured creditor of the servicer. If any funds were required to be returned to the bankruptcy estate of the servicer, the issuing entity would expect that the amount of any future storm recovery charges would be increased through the statutory true-up mechanism to recover such amount, though this would not eliminate the risk of payment delays or losses on your investment in the Bonds.

#### Claims against DEC or any successor seller might be limited in the event of a bankruptcy of the seller.
If the seller were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us against the seller under the sale agreement and the other documents executed in connection with the sale agreement likely would be unsecured claims and would be adjudicated in the bankruptcy case. In addition, the bankruptcy court might estimate any contingent claims that we have against the seller and, if it determines

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that the contingency giving rise to these claims is unlikely to occur, estimate the claims at a lower amount. A party in interest in the bankruptcy of the seller might challenge the enforceability of the indemnity provisions in a sale agreement. If a court were to hold that the indemnity provisions were unenforceable, we would be left with a claim for actual damages against the seller based on breach of contract principles, which would be subject to estimation and/or calculation by the court. We cannot give any assurance as to the result if any of the above-described actions or claims were made. Furthermore, we cannot give any assurance as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving the seller.

#### The bankruptcy of DEC or any successor seller might limit the remedies available to the indenture trustee.

#### Other Risks Associated with the Purchase of the Bonds
 ***DEC's obligation to indemnify DEC NC Storm Funding II for a breach of a representation or warranty might not be sufficient to protect your investment.***

DEC will be obligated under the sale agreement to indemnify us and the indenture trustee, for itself and on behalf of the bondholders, only in specified circumstances. DEC will not be obligated to repurchase the storm recovery property in the event of a breach of any of its representations, warranties or covenants regarding such storm recovery property. Similarly, DEC will be obligated under the servicing agreement to indemnify us and the indenture trustee, for itself and on behalf of the bondholders only in specified circumstances. Please read "The Sale Agreement" and "The Servicing Agreement" in this prospectus.

Neither the indenture trustee nor the bondholders will have the right to accelerate payments on the related Bonds as a result of a breach under the sale agreement or servicing agreement, absent an event of default under the indenture and series supplement as described in "Description of the Storm Recovery Bonds—Events of Default; Rights Upon Event of Default." Furthermore, DEC might not have sufficient funds available to satisfy its indemnification obligations, and the amount of any indemnification paid by DEC might not be sufficient for you to recover all of your investment in the Bonds. In addition, if DEC becomes obligated to indemnify bondholders, the ratings on the Bonds might be downgraded as a result of the circumstances causing the breach and the fact that bondholders will be unsecured creditors of DEC with respect to any of these indemnification amounts. DEC will not indemnify any person for any loss, damages, liability, obligation, claim, action, suit or payment resulting solely from a downgrade in the ratings on the Bonds, or for any consequential damages, including any loss of market value of the Bonds resulting from a default or a downgrade of the ratings of the Bonds. Please read "The Sale Agreement—Seller Representations and Warranties" and "—Indemnification" in this prospectus.

#### DEC may sponsor additional issuances of storm recovery bonds.

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and the execution and delivery of a joinder or an amendment to the intercreditor agreements are condition precedents to the sale of additional storm recovery property or similar property consisting of nonbypassable charges payable by customers comparable to the storm recovery property to another entity. Please read "Intercreditor Agreements" and "Sale Agreement—Covenants of the Seller" in this prospectus.

#### The credit ratings are no indication of the expected rate of payment of principal on the Bonds.
We expect the Bonds will receive credit ratings from at least two nationally recognized statistical rating organizations ("**NRSRO**"). A rating is not a recommendation to buy, sell or hold the Bonds. The ratings merely analyze the probability that we will repay the total principal amount of the Bonds at the final maturity date (which is later than the scheduled final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule.

Under Rule 17g-5 of the Exchange Act, NRSROs providing the sponsor with the requisite certification will have access to all information posted on a website by the sponsor for the purpose of determining the initial rating and monitoring the rating after the closing date in respect of the Bonds. As a result, an NRSRO other than the NRSRO hired by the sponsor (the "**hired NRSRO**") may issue ratings on the Bonds ("**unsolicited ratings**"), which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSROs. The unsolicited ratings may be issued prior to, or after, the closing date in respect of the Bonds. Issuance of any unsolicited rating will not affect the issuance of the Bonds. Issuance of an unsolicited rating lower than the ratings assigned by the hired NRSRO on the Bonds might adversely affect the value of the Bonds and, for regulated entities, could affect the status of the Bonds as a legal investment or the capital treatment of the Bonds. Investors in the Bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO. None of DEC, us, the underwriters or any of their affiliates will have any obligation to inform you of any unsolicited ratings assigned after the date of this prospectus. In addition, if we or DEC fail to make available to a non-hired NRSRO any information provided to any hired rating agency for the purpose of assigning or monitoring the ratings on the Bonds, a hired NRSRO could withdraw its ratings on the Bonds, which could adversely affect the market value of your Bonds and/or limit your ability to resell your Bonds.

#### The Bonds' credit ratings might affect the market value of your Bonds.
A downgrading of the credit ratings of the Bonds might have an adverse effect on the market value of the Bonds. Credit ratings might change at any time and an NRSRO has the authority to revise or withdraw its rating based solely upon its own judgment. In addition, any downgrade in the credit ratings of the Bonds may result in the Bonds becoming ineligible to be held by certain funds or investors, which may require such investors to liquidate their investment in the Bonds and result in lower prices and a less liquid trading market for the Bonds.

#### Technological change might make alternative energy sources more attractive in the future.
Technological developments and/or tax or other economic incentives might result in the introduction of economically attractive, more fuel-efficient, more environmentally-friendly and/or more cost-effective alternatives to purchasing electricity through a utility's distribution facilities for increasing numbers of retail customers. Manufacturers of self-generation facilities may develop smaller-scale, more fuel-efficient on-site generating and/or storage units that can be cost-effective options for a greater number of retail customers. Moreover, an increase in self-service power may result if extreme weather conditions result in shortages of grid-supplied energy or if other factors cause grid-supplied energy to be less reliable. Customers who self-generate their electricity must pay the storm recovery charges to the extent that such energy, or emergency back-up power, is transmitted through use of a utility's delivery system. Technological developments might allow greater numbers of retail customers to reduce or even altogether avoid storm recovery charges under such provisions through on-site generation and storage. This might reduce the kilowatt-hours of electric energy delivered to retail customers by means of DEC's transmission and distribution facilities, thereby causing storm recovery charges to the remaining retail customers to increase.

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#### Absence of a secondary market for the Bonds might limit your ability to resell Bonds.
The underwriters for the Bonds might assist in resales of such Bonds but they are not required to do so. A secondary market for the Bonds might not develop. If a secondary market does develop, it might not continue or there might not be sufficient liquidity to allow you to resell any of your Bonds. We do not anticipate that any Bonds will be listed on any securities exchange. Please read "Plan of Distribution (Conflicts of Interest)" in this prospectus.

#### You might receive principal payments for the Bonds later than you expect.
The amount and the rate of collection of the storm recovery charges for the Bonds will be impacted by the actual electric usage by customers and collections from customers' electricity bills by the servicer and, together with the related storm recovery charge adjustments, will generally determine whether there is a delay in the scheduled repayment of bond principal. If the servicer collects the storm recovery charges at a slower rate than expected, it shall have to request adjustments of the storm recovery charges to correct for those delays. If those adjustments are not timely and accurate, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the Bonds.

#### DEC's credit ratings might affect the market value of your Bonds.
Although DEC is not an obligor on the Bonds, a downgrading of DEC's current credit ratings might have an adverse effect, at least temporarily, on the market value of the Bonds. Credit ratings might change at any time. A rating agency has the authority to revise or withdraw its rating based solely upon its own judgment.

 ***The ratings are no indication of the expected rate of payment of principal on the Bonds and DEC NC Storm Funding II might pay principal of the Bonds later than expected.***

The Bonds will be rated by one or more established rating agencies. A rating is not a recommendation to buy, sell or hold the Bonds. The ratings merely analyze the probability that we will repay the total principal amount of such tranche of the Bonds at its final maturity date (which is later than the expected final payment date) and will make timely interest payments. The ratings are not an indication that the rating agencies believe that principal payments are likely to be paid on time according to the expected sinking fund schedule. Thus, we might repay the principal of your Bonds later than you expect, which might materially reduce the value of your investment.

#### Regulatory provisions affecting certain investors could adversely affect the liquidity of the Bonds.
Prospective investors in the Bonds should be aware of Regulation (EU) 2017/2402 of the European Parliament and of the council of December 12, 2017 (as amended, the "**EU Securitization Regulation**") which has direct effect in member states of the European Union ("**EU**"), is expected to be implemented in other countries in the EEA, and applies to certain EU-regulated investors.

Prospective investors in the Bonds should also be aware of the framework for the regulation of securitizations in the UK, which comprises (A) the UK Securitisation Regulations 2024 (the "**UK Securitization Framework**"), (B) the securitisation sourcebook of the handbook of rules and guidance adopted by the UK Financial Conduct Authority ("**FCA**"), (C) the Securitisation Part of the rulebook of published policy of the Prudential Regulation Authority ("**PRA**") of the Bank of England, and (D) relevant provisions of the Financial Services and Markets Act 2000 (each as amended, supplemented or replaced from time to time).

Article 5 of the EU Securitization Regulation places certain conditions on investments in a "securitisation" as defined in the EU Securitization Regulation (the "**EU Due Diligence Requirements**") by an EU-regulated "institutional investor", defined in the EU Securitization Regulation to include: (a) insurance undertakings and reinsurance undertakings as defined in Directive 2009/138/EC; (b) institutions for occupational retirement provision falling within the scope of Directive (EU) 2016/2341 (subject to certain exceptions), and certain investment managers and authorized entities appointed by such institutions; (c) alternative investment fund managers as defined in Directive 2011/61/EU which manage and/or market

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alternative investment funds in the EU; (d) certain internally-managed investment companies authorized in accordance with Directive 2009/65/EC ("**UCITS**"), and management companies as defined in that Directive; and (e) credit institutions and investment firms as defined in Regulation (EU) No 575/2013 (the "**EU CRR"**) (and. The EU Due Diligence Requirements also apply to investments by certain consolidated affiliates thereof, wherever established or located, of institutions or entities that are subject to the EU CRR) (each such entities or affiliates, together with all institutional investors referred to in this paragraph, "EU **Institutional Investors**").

Article 5 of the UK Securitization Framework places certain conditions on investments in a "securitisation" as defined in the UK Securitization Framework (the "**UK Due Diligence Requirements**" and, together with the EU Due Diligence Requirements, the "**Due Diligence Requirements**" (and references in this Registration Statement to "**the applicable Due Diligence Requirements**" shall mean such Due Diligence Requirements to which a particular Institutional Investor is subject)) by an "institutional investor", defined in the UK Securitization Framework to include: (a) insurance undertakings and reinsurance undertakings as defined in section 417(1) of the FSMA; (b) institutions for occupational retirement provision falling within the scope of section 417(1) of the FSMA; (c)trustees and managers of occupational pension schemes as defined in section 1(1) of the Pension Schemes Act 1993 that have their main administration in the UK, and certain fund managers of such schemes; (d) an AIFM (as defined in regulation 4(1) of the Alternative Investment Fund Managers Regulations 2013(5)) which markets or manages AIFs in the UK, and small registered UK AIFMs (as defined in such Regulations); (e) a management company as defined in section 237(2) of the FSMA; (f) a UCITS as defined by section 236A of the FSMA, which is an authorized open ended investment company as defined in section 237(3) of the FSMA; and (g) a CRR firm or a FCA investment firm, each as defined by Article 4(1)(2A) of Regulation (EU) No 575/2013 as it forms part of the domestic law of the UK by virtue of the EUWA (the "**UK CRR**") (and. The UK Due Diligence Requirements also apply to investments by certain consolidated affiliates thereof, wherever established or located, of such UK CRR firms) (each such entities that are subject to the UK CRR (such affiliates, together with all institutional investors referred to in this paragraph, "**UK Institutional Investor**" and together with EU Institutional Investors, the "**Institutional Investors**")".

Pursuant to, among other things, the EU Due Diligence Requirements, an Institutional Investor must and the UK Due Diligence Requirements provide that, prior to investing in a securitisation among other things, verify that (i), an EU Institutional Investor or a UK Institutional Investor, as applicable, is required to verify that: (a) in each case, where the originator or original lender is established outside the EU, the EEA or the UK, as applicable, the originator or original lender grants all the credits giving rise to the underlying exposures on the basis of sound and well-defined criteria and clearly established processes for approving, amending, renewing and financing those credits and has effective systems in place to apply those criteria and processes in order to ensure that credit-granting requirements are satisfied is based on a thorough assessment of the obligor's creditworthiness; (ii) in each case, the originator, sponsor or original lender retains on an ongoing basis (or, in the case of UK Institutional Investors, continually retains) a material net economic interest in the securitisation which, in any event, will not be less than 5%, determined in accordance with Article 6 of the EU Securitization Regulation or the UK Securitization Framework, and discloses that risk retention; (iii) in the case of an EU Institutional Investor, the originator, sponsor or relevant securitisation special purpose entity has, where applicable, made available the information as required by Article 7 of the EU Securitization Regulation in accordance with the frequency and modalities provided for in that Article; and (iv) in the case of a UK Institutional Investor, the originator, sponsor or relevant securitization special purpose entity, if established in a third country, has, where applicable, has made available sufficient information which is substantially the same as that which it would have made available under Article 7 of the UK Securitization Framework. Furthermore, an Institutional Investor must be able to demonstrate that it has undertaken certain due diligence with respect to various matters, including the risk characteristics of its investment position and the underlying assets, and that procedures are established for such activities to be monitored to enable the institutional investor independently to assess the risks of holding the securitisation position, and has committed to make further information available on an ongoing basis, as appropriate.

Each of the EU Due Diligence Requirements and the UK Due Diligence Requirements further require that an EU Institutional Investor or UK Institutional Investor, respectively, carry out a due diligence assessment which enables it to assess the risks involved prior to investing, including but not limited to the risk

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characteristics of the individual investment position and the underlying assets and all the structural features of the securitisation that can materially impact the performance of the investment. In addition, each of the EU Due Diligence Requirements and the UK Due Diligence Requirements require that, while holding an exposure to a securitisation, an EU Institutional Investor or a UK Institutional Investor, as applicable, is subject to various monitoring obligations in relation to such exposure, including but not limited to: (i) establishing appropriate written procedures to monitor compliance with the aforementioned due diligence requirements and the performance of the investment and of the underlying assets, (ii) performing stress tests on the cash flows and collateral values supporting the underlying assets, (iii) ensuring certain internal reporting to its management body (or equivalent), and (iv) being able to demonstrate to its relevant regulatory authorities, upon request, that it has a comprehensive and thorough understanding of the investment and underlying assets and that it has implemented written policies and procedures for the risk management of the investment and as otherwise required by the EU Due Diligence Requirements or the UK Due Diligence Requirements, as applicable.

Neither we nor DEC believe that the Bonds fall within the definition of a "securitization" for purposes of the EU Securitization Regulation or the UK Securitization Framework as there is no tranching of credit risk associated with exposures under the transactions described in this prospectus. Therefore, such transactions are not subject to the European Securitization Rules or the UK Securitization Framework. As such, neither we nor DEC, nor any other party to the transactions described in this prospectus, intend, or are required under the transaction documents, to retain a material net economic interest in respect of such transactions, or to take, or to refrain from taking, any other action, in a manner prescribed or contemplated by the European Securitization Rules or the UK Securitization Framework. In particular, no such person undertakes to take, or to refrain from taking, any action for purposes of compliance by any investor (or any other person) with any requirement of the European Securitization Rules or the UK Securitization Framework to which such investor (or other person) may be subject at any time.

However, if a competent authority were to take a contrary view and determine that the transactions described in this prospectus do constitute a securitization for purposes of the EU Securitization Regulation or the UK Securitization Framework, then any failure by an EU Institutional Investor or a UK Institutional Investor (as applicable) to comply with any applicable European Securitization Rule or UK Securitization Framework (as applicable) with respect to an investment in the Bonds may result in the imposition of a penalty regulatory capital charge on that investment or of other regulatory sanctions and remedial measures.

Consequently, the Bonds may not be a suitable investment for EU Institutional Investors or UK Institutional Investors. As a result, the price and liquidity of the Bonds in the secondary market may be adversely affected. Prospective investors are responsible for analyzing their own legal and regulatory position and are advised to consult with their own advisors and any relevant regulator or other authority regarding the scope, applicability and compliance requirements of the European Securitization Rules and the UK Securitization Framework, and the suitability of the Bonds for investment. Neither we nor DEC, nor any other party to the transactions described in this prospectus, make any representation as to any such matter, or have any liability to any investor (or any other person) for any non-compliance by any such person with the European Securitization Rules, the UK Securitization Framework or any other applicable legal, regulatory or other requirements.

 ***If the investment of collected storm recovery charges and other funds held pursuant to the indenture and the series supplement in the collection account results in investment losses or the investments become illiquid, you might receive payment of principal of and interest on the Bonds later than you expect.***

Funds held pursuant to the indenture and the series supplement in the collection account will be invested in eligible investments. Eligible investments include money market funds having a rating from Moody's Investors Service, Inc. (or any successor in interest), or Moody's, and Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business (or any successor in interest), or S&P, of P-1 and A-1, respectively. Although investments in these money market funds have traditionally been viewed as highly liquid with a low probability of principal loss, illiquidity and principal losses have been experienced by investors in certain of these funds as a result of disruptions in the financial markets in recent years. If investment losses or illiquidity are experienced, you might experience a delay in payments of principal and interest and a decrease in the value of your investment in the Bonds.

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#### DEC'S REVIEW OF STORM RECOVERY PROPERTY
Pursuant to the rules of the SEC, DEC, as sponsor, has performed, as described below, a review of the storm recovery property underlying the Bonds. As required by these rules, the review was designed and effected to provide reasonable assurance that disclosure regarding the storm recovery property is accurate in all material respects. DEC did not engage a third party in conducting its review.

The Bonds will be secured under the indenture by the storm recovery bond collateral. The principal asset of the indenture's trust estate is the storm recovery property relating to the Bonds. The storm recovery property is a present property right authorized and created pursuant to Financing Act and the financing order. The storm recovery property includes the right to impose, bill, charge, collect and receive nonbypassable irrevocable storm recovery charges in amounts necessary to pay principal on and interest of the Bonds and other required amounts and charges owing in connection with the Bonds, the right under the financing order to obtain true-up adjustments of storm recovery charges under Financing Act (with respect to adjustments, in the manner and with the effect provided in the servicing agreement) and all revenue, collections, claims, right to payments, payments, money and proceeds arising out of the rights and interests created under the financing order. Under the Financing Act and the financing order, the storm recovery charges are payable by all existing and future customers receiving transmission or distribution service, or both, from DEC or its successors or assignees under NCUC-approved rate schedules or under special contracts, even if a customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in North Carolina.

The storm recovery property is not a receivable, and the principal collateral securing the Bonds is not a pool of receivables. Storm recovery charges that relate to the storm recovery property are irrevocable and not subject to reduction, impairment, postponement, termination or, except for the specified true-up adjustments to correct any overcollections or undercollections, adjustment by further action of the NCUC. The rates at which storm recovery charges are billed to customers will be adjusted to correct any overcollections or undercollections from prior periods. These adjustments are intended to ensure the recovery of revenues sufficient to retire the principal amount of the Bonds in accordance with the expected sinking fund schedule, to pay all interest on the Bonds when due, to pay fees and expenses of servicing the Bonds and premiums, if any, associated with the Bonds and to fund any required credit enhancement for the Bonds. In addition to the semi-annual true-up adjustments, the servicer is also required to implement (a) quarterly true-up adjustments beginning twelve (12) months prior to the latest scheduled final payment date, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of scheduled principal of and interest on the Bonds and other required amounts and charges owing in connection with the Bonds on the next payment date. There is no cap on the level of storm recovery charges that may be imposed on electric customers as a result of the true-up mechanism to pay principal of and interest on the Bonds when due and other required amounts and charges owing in connection with the Bonds. All revenues and collections resulting from storm recovery charges provided for in the financing order are part of the storm recovery property. The storm recovery property relating to the Bonds is described in more detail under "The Storm Recovery Property and the Financing Act" in this prospectus. In the financing order, the NCUC, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • orders that the owner of storm recovery property is authorized to impose, bill, charge, collect, receive and adjust from time to time (as described in the financing order) a storm recovery charge to be collected on a per kWh basis from all applicable customer rate classes until the Bonds are paid in full and all other costs of the Bonds have been recovered in full;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • orders that such storm recovery charges shall be in amounts sufficient to ensure the timely recovery of DEC's storm recovery costs and financing costs including the payment of principal of and interest on the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • orders that upon the transfer of the storm recovery property to us by DEC, we will have (i) all rights and interest of DEC with respect to the storm recovery property including, without limitation, the right to impose, bill, charge, collect and receive storm recovery charges authorized by the financing order and to obtain periodic adjustments to the storm recovery charges and (ii) all revenues, collections, claims, rights to payments, payments, money or proceeds with respect thereto; and

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reaffirms that it shall not take or permit any action that impairs or would impair the value of storm recovery property or revise the storm recovery costs for which recovery is authorized, in any way impair the rights and remedies of the bondholders, assignees and other financing parties or, except for the true-up adjustment, reduce, alter, or impair storm recovery charges that are to be imposed, billed, collected, charged and remitted for the benefit of the bondholders and other financing parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related Bonds have been paid and performed in full.

Please read "The Storm Recovery Property and the Financing Act" and "DEC's Financing Order" in this prospectus for more information.

The characteristics of storm recovery property are unlike the characteristics of assets underlying mortgage and other commercial asset based financings because storm recovery property is a creature of statute and state regulatory commission proceedings. Because the nature and characteristics of storm recovery property and many elements of storm recovery bond financings are set forth in and constrained by the Financing Act and the financing order, DEC, as sponsor, does not select the assets to be pledged as collateral in ways common to many traditional asset-based financings. Moreover, the Bonds do not contain origination or underwriting elements similar to typical mortgage or other loan transactions involved in other forms of asset-backed securities. The Financing Act and the financing order require the imposition on, and collection of storm recovery charges from, existing and future customers. Since the storm recovery charges are assessed against all such customers and the true-up mechanism adjusts for the impact of customer defaults, the collectability of the storm recovery charges is not ultimately dependent upon the credit quality of particular DEC customers, as would be the case in the absence of the true-up adjustment.

The review by DEC of the storm recovery property underlying the Bonds has involved a number of discrete steps and elements as described in more detail below. First, DEC has analyzed and applied the Financing Act's requirements for recovering storm recovery costs and approval of the NCUC for the issuance of the financing order and in its proposal with respect to the characteristics of the storm recovery property to be created pursuant to the financing order. In preparing this proposal, DEC worked with its counsel and its structuring advisor in preparing the application for a financing order. DEC has analyzed economic issues and practical issues for the scheduled payment of principal of and interest on the Bonds, including the impact of economic factors, potential for disruptions due to weather or catastrophic events and its own forecasts for customer growth as well as the historic accuracy of its prior forecasts.

In light of the unique nature of the storm recovery property, DEC has taken (or, prior to the offering of the Bonds, will take) the following actions in connection with its review of the storm recovery property and the preparation of the disclosure for inclusion in this prospectus describing the storm recovery property, the Bonds and the proposed financing transaction:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reviewed the Financing Act, other relevant provisions of North Carolina statutes and any applicable rules, regulations and orders of the NCUC as they relate to the storm recovery property in connection with the preparation and filing of the application with the NCUC for the approval of the financing order in order to confirm that the application and proposed financing order satisfied applicable statutory and regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • actively participated in the proceeding before the NCUC relating to the approval of the requested financing order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • compared the process by which the financing order was adopted and approved by the NCUC to the Financing Act and any applicable rules and regulations of the NCUC as they relate to the storm recovery property to confirm that it met such requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • compared the proposed terms of the Bonds to the applicable requirements in the Financing Act, other relevant provisions of North Carolina statutes, the financing order and any applicable regulations of the NCUC to confirm that they met such requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • prepared and reviewed the agreements to be entered into in connection with the issuance of the Bonds and compared such agreements to the applicable requirements in the Financing Act, other

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relevant provisions of North Carolina statutes, the financing order and any applicable regulations of the NCUC to confirm that they met such requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reviewed the disclosure in this prospectus regarding the Financing Act, other relevant provisions of North Carolina statutes, the financing order and the agreements to be entered into in connection with the issuance of the Bonds, and compared such descriptions to the relevant provisions of the Financing Act, other relevant provisions of North Carolina statutes, the financing order and such agreements to confirm the accuracy of such descriptions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • consulted with legal counsel to assess if there is a basis upon which the bondholders (or the indenture trustee acting on their behalf) could successfully challenge the constitutionality of any legislative action by the State of North Carolina (including action by the NCUC or the voters by amendment to the North Carolina Constitution) that could repeal or amend the provisions of the Financing Act in a way that could substantially impair the value of the storm recovery property, or substantially reduce, alter or impair the storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reviewed the process and procedures in place for it, as servicer, to perform its obligations under the servicing agreement, including billing, collecting, receiving and posting the storm recovery charges to be provided for under the storm recovery property, forecasting storm recovery charges, and preparing and filing applications for true-up adjustments to the storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reviewed the operation of the true-up adjustment for adjusting storm recovery charge levels to meet the scheduled payments on the Bonds and in this context took into account its experience with the NCUC; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • with the assistance of its advisors, prepared financial models in order to set the initial storm recovery charges to be provided for under the storm recovery property at levels expected to be sufficient to pay principal of and interest on the Bonds when due and other required amounts and charges owing in connection with the Bonds.

In connection with the preparation of such models, DEC:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reviewed (i) the historical electric consumption and customer growth within its service territory and (ii) forecasts of expected energy sales and customer growth; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • analyzed the sensitivity of the weighted average life of the Bonds in relation to variances in actual energy consumption levels and related charge collections from forecasted levels and in relation to the true-up adjustment in order to assess the probability that the weighted average life of the Bonds may be extended as a result of such variances, and in the context of the operation of the true-up adjustment for adjustment of storm recovery charges to address undercollections or overcollections in light of scheduled payments on the Bonds to prevent an event of default.

As a result of this review, DEC has concluded that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the storm recovery property, the financing order and the agreements to be entered into in connection with the issuance of the Bonds meet in all material respects the applicable statutory and regulatory requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the disclosure in this prospectus regarding the Financing Act, other relevant provisions of North Carolina statutes, the financing order and the agreements to be entered into in connection with the issuance of the Bonds is, as of its respective date, accurate in all material respects and fails to omit any material information;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer has adequate processes and procedures in place to perform its obligations under the servicing agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • storm recovery charges, as adjusted from time to time as provided in the Financing Act and the financing order, are expected to generate sufficient revenues to pay principal of and interest on the Bonds when due and other required amounts and charges owing in connection with the Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the design and scope of DEC's review of the storm recovery property as described above is effective to provide reasonable assurance that the disclosure regarding the storm recovery property in this prospectus is accurate in all material respects.

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#### THE STORM RECOVERY PROPERTY AND THE FINANCING ACT

#### The Storm Recovery Property
In general terms, all of the rights and interests of DEC that relate to the Bonds under the financing order, upon transfer to us pursuant to the sale agreement, are referred to in this prospectus as the storm recovery property. The storm recovery property includes the right to impose, bill, charge, collect and receive, through the storm recovery charges payable by existing and future customers who receive electric transmission or distribution service, or both, from DEC or its successors or assignees under rate schedules approved by the NCUC or under special contracts, including the State of North Carolina and other governmental entities, an amount sufficient to pay principal and interest and other amounts in connection with the Bonds. The Financing Act provides that the right to collect payments based on the storm recovery charge is a present property right that may be pledged, assigned or sold in connection with the issuance of the Bonds.

The storm recovery property is not a receivable, and the principal collateral securing the Bonds is not a pool of receivables.

During 2024, approximately 20% of DEC's total North Carolina retail billed electric consumption was by industrial service customers, approximately 41% was by general service customers and approximately 38% was by residential customers. Except in their capacity as customers, neither the State of North Carolina nor any political subdivision, agency, authority or instrumentality of the State of North Carolina, nor any other entity, will be obligated to provide funds for the payment of principal of and interest on the Bonds.

Storm recovery charges authorized in the financing order are irrevocable and not subject to reduction, impairment, or adjustment by further action of the NCUC, except for at least semi-annual true-up adjustments that are necessary to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of principal of and interest on the Bonds when due and other financing costs and other required amounts and charges payable in connection with the Bonds. Please read "DEC's Financing Order—True-Up Mechanism" in this prospectus. All revenues resulting from storm recovery charges are part of the storm recovery property.

The storm recovery property relating to the Bonds is described in more detail under "The Sale Agreement—Sale and Assignment of the Storm Recovery Property" in this prospectus.

The aggregate principal amount of Bonds that may be issued pursuant to the financing order may not exceed the Securitizable Balance on the date of issuance. The servicer will bill and collect storm recovery charges allocable to the Bonds and will remit the collections to the indenture trustee. DEC intends to include the storm recovery charges (which may be consolidated with other storm recovery charges) as a separate line item on its customers' bills.

Because the amount of storm recovery charge collections will depend in part on the amount of electricity consumed by customers of DEC or its successor, the amount of collections may vary from year to year. Please read "Duke Energy Carolinas, LLC" in this prospectus.

Under the Financing Act, if a default or termination occurs under the terms of the Bonds, the indenture trustee or the holders of the Bonds may foreclose on or otherwise enforce their lien and security interest in the storm recovery property.

However, in the event of foreclosure, there is likely to be a limited market, if any, for the storm recovery property. Therefore, foreclosure might not be a realistic or practical remedy. Please read "Risk Factors—Risks Associated with the Unusual Nature of the Storm Recovery Property—Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the Bonds before maturity might result in your investment being repaid either earlier or later than expected" and "Description of the Storm Recovery Bonds—Events of Default; Rights Upon Event of Default" in this prospectus.

#### The Financing Act Authorizes Utilities to Recover Storm Recovery Costs Through the Issuance of Storm Recovery Bonds
The Financing Act, authorizes public utilities in the State of North Carolina to petition the NCUC for financing orders that authorize, among other things,

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The issuance of storm recovery bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The creation of storm recovery property; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The imposition, collection, and periodic adjustments of storm recovery charges.

The Financing Act gives an electric utility the opportunity to finance the recovery of storm recovery costs it has incurred or expects to incur and storm recovery costs deemed reasonable and prudent by the NCUC through a final order approving a settlement or other final order issued by the NCUC.

In order to finance their storm recovery costs and financing costs, North Carolina utilities may petition for a financing order under the Financing Act. As described below, DEC petitioned for the financing order, which was issued by the NCUC on June 18, 2025, which is expected to become final and no longer subject to appeal on August 19, 2025.

#### The Financing Act Provides for the Issuance of a Financing Order
The Financing Act authorizes the NCUC to issue a financing order. A financing order provides for the creation of storm recovery property, including the right to impose, bill, charge, collect and receive the storm recovery charges and for the issuance of storm recovery bonds.

In addition, a financing order will:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • authorize the transfer of storm recovery property to an issuing entity to secure storm recovery bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • set forth procedures for establishing the initial storm recovery charges and for periodic true-up adjustments to storm recovery charges in the event of overcollection or undercollection of storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • remain in effect until the storm recovery bonds issued pursuant to the financing order have been paid in full and or defeased and, in each case, the NCUC-approved financing costs of such Bonds have been recovered in full; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • remain in effect and unabated notwithstanding the reorganization, bankruptcy, or other insolvency proceedings, merger, or sale of the electric utility or its successors or assignees.

Having issued the financing order, the NCUC may not, in exercising its powers and carrying out its duties regarding any matter within its authority, (i) consider storm recovery bonds issued pursuant to the financing order to be the debt of DEC other than for U.S. federal income tax purposes, (ii) consider the storm recovery charges paid under the financing order to be the revenue of DEC for any purpose, or (iii) consider the storm recovery costs or financing costs specified in the financing order to be the costs of DEC, nor may the NCUC determine any action taken by DEC which is consistent with the financing order to be unjust or unreasonable.

#### The Financing Act Provides for the Creation of Storm Recovery Property to Secure the Bonds
The Financing Act authorizes the NCUC, through issuance of a financing order, to provide for the creation of storm recovery property to secure repayment of storm recovery bonds. Storm recovery property is defined under the Financing Act as all of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) all rights and interests of an electric utility or its successor or assignee under a financing order, including the right to impose, bill, charge, collect and receive storm recovery charges authorized in the financing order and to obtain periodic adjustments to such storm recovery charges as provided in the financing order, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) all revenues, collections, claims, rights to payment, payments, money or proceeds arising from the rights and interests specified in the financing order, regardless of whether such revenues, collections, claims, rights to payment, payments, money or proceeds are imposed, billed, received, collected or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.

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Pursuant to the Financing Act and a financing order, the owner of storm recovery property is authorized to impose and collect a nonbypassable, consumption based, storm recovery charge, which charges shall be paid by all existing and future customers receiving transmission or distribution service, or both, from the electric utility (or its successors or assignees) under NCUC-approved rate schedules or under special contracts (i.e., contracts with large industrial users), even if the customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in North Carolina. Under current law, customers of North Carolina electric utilities cannot buy their electricity from alternative electric suppliers. DEC has not entered into any special contracts with its retail customers.

The storm recovery charges authorized to be imposed and collected pursuant to the Financing Act and a financing order are designed to recover (among other financing costs) all principal of and interest on the Bonds, and any other costs of issuing, supporting, repaying, refunding and servicing such Bonds, as more fully described below.

#### The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds
The Financing Act contains a number of provisions designed to facilitate the recovery of storm recovery costs and the issuance of storm recovery bonds.

*A Financing Order is Irrevocable.* Once storm recovery bonds have been issued or storm recovery property has been transferred under an effective financing order, the financing order, together with the storm recovery charges established in the financing order, are irrevocable and not subject to amendment, modification or termination by the NCUC. The only exception is for periodic true-up adjustments pursuant to the Financing Act in order to correct overcollections or undercollections of storm recovery charges and to ensure that sufficient funds are available for payments of principal of and interest on the storm recovery bonds when due and other financing costs and required amounts and charges payable in connection with such Bonds.

*The Financing Act Contains a State Pledge.* Under the Financing Act, the State of North Carolina and its agencies, including the NCUC, has pledged to storm recovery bondholders, that it will not (i) alter the provisions of the Financing Act that make the storm recovery charges imposed by a financing order irrevocable, binding and nonbypassable, (ii) take or permit any action that impairs or would impair the value of the storm recovery property, (iii) impair the rights and remedies of the holders, assignees, and other financing parties or (iv) except for "true-up" adjustments discussed in the following paragraph, reduce, alter, or impair the storm recovery charges to be imposed, billed, charged, collected and remitted for the benefit of the holders of storm recovery bonds until any and all principal, interest, other financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the storm recovery bonds have been paid in full. This state pledge does not preclude any limitation or alteration of the Financing Act or a financing order if "full compensation" is made by law for the "full protection" of the storm recovery charges collected pursuant to a financing order and of the holders of the storm recovery bonds or any financing party entering into a contract with the electric utility. Further, even after a financing order is effective, the NCUC retains the power to interpret the financing order. Please read "Risk Factors—Risks Associated with Potential Judicial, Legislative or Regulatory Actions" in this prospectus.

*Storm Recovery Charge Adjustments.* The Financing Act requires the NCUC to provide a formula-based true-up mechanism pursuant to which the storm recovery charges are to be reviewed and adjusted at least semi-annually such review by the NCUC being limited to review of mathematical or clerical errors. The purposes of these adjustments are:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to correct any overcollections or undercollections of the charges during the preceding remittance period, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to otherwise ensure the collection of storm recovery charges sufficient to provide for the timely payments of scheduled principal of and interest on the storm recovery bonds, financing costs and other required amounts and charges payable in connection with the storm recovery bonds approved under the financing order.

Neither the Financing Act nor the financing order imposes any cap on the size of storm recovery charges.

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*Transmission and Distribution Customers Cannot Avoid Storm Recovery Charges—Nonbypassable.* The Financing Act provides that the storm recovery charges are nonbypassable. The charges will be collected from all existing and future North Carolina customers receiving transmission or distribution service, or both, from the utility or its successors or assignees under NCUC-approved rate schedules or under special contracts, even if the customer elects to purchase electricity from an alternative electric supplier following a fundamental change in regulation of public utilities in the State of North Carolina. Self-generators that receive no transmission or distribution service from DEC are not liable for the storm recovery charge. The Financing Act and the financing order do not provide for exit fees to be charged to any customers that might leave the grid to self-generate.

Any successor to DEC, whether pursuant to any reorganization, bankruptcy, or other insolvency proceeding or whether pursuant to any merger or acquisition, sale, or other business combination, or transfer by operation of law, as a result of electric utility restructuring or otherwise, is required to cooperate with the servicer in performing and satisfying all obligations of, and will have the same rights under the financing order as, DEC in the same manner and to the same extent as DEC, including cooperating with the servicer in collecting and paying to us the revenues, collections, payments or proceeds of the storm recovery property.

*The Financing Act Protects the Lien on Storm Recovery Property for the Benefit of Bondholders.* The Financing Act governs whether the transfer of storm recovery property from the electric utility to an issuer of bonds will be enforceable and will be perfected under North Carolina law and whether the security interest granted by us to the indenture trustee in the storm recovery property will be perfected under North Carolina law. The Financing Act provides that a transfer of an interest in storm recovery property to an assignee is enforceable only upon all of the following items having been attained:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the issuance of the financing order,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller having rights in the storm recovery property or the power to transfer rights in the storm recovery property to an assignee,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • transfer documents having been executed and delivered to the assignee in connection with the issuance of bonds, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the receipt of value for the storm recovery property.

A transfer of or security interest in the storm recovery property is perfected by means of a filing under the Financing Act. Upon perfection, the lien attaches both to storm recovery property and to all proceeds of storm recovery property, whether the related storm recovery charges have accrued or not. Perfection of the indenture trustee's security interest in the storm recovery property is necessary in order to establish the priority of the indenture trustee's security interests over claims of other parties to the storm recovery property.

The Financing Act provides that the priority of a security interest in storm recovery property will not be impaired by commingling of funds arising from storm recovery property with other funds among other things.

The Financing Act further provides that any other security interest that may apply to such funds, other than a security interest perfected in accordance with the Financing Act, are terminated when such funds are transferred to a segregated account for the assignee or a financing party.

*The Financing Act Provides that the Transfer of Storm Recovery Property Is a True Sale.* The Financing Act provides that an electric utility's transfer of storm recovery property is a "true sale" and is not a pledge of or a secured transaction relating to the electric utility's right, title and interest in the storm recovery property (other than for federal and state income and franchise tax purposes) and that legal and equitable title passes to the transferee, if the agreement governing that transfer expressly states that the transfer is a sale or other absolute transfer. The Financing Act provides that the transfer as a true sale is not affected by:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • commingling of amounts arising with respect to the storm recovery property with other amounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • retention by the seller of (i) a partial or residual interest, including an equity interest, in the storm recovery property, whether direct or indirect, or whether subordinate or otherwise or (ii) the right to

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recover costs associated with taxes, franchise fees, or license fees imposed on the collection of storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any recourse that the transferee may have against the electric utility;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any indemnification rights, obligations, or repurchase rights made or provided by the electric utility;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the obligation of the electric utility to collect storm recovery charges on behalf of an assignee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller acting as servicer of the storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • granting or providing to holders of the bonds a preferred right to the storm recovery property or credit enhancement by the electric utility or its affiliates with respect to the related bonds; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any application of the formula-based adjustment mechanism.

Please read "Risk Factors—Risks Associated with Potential Bankruptcy Proceedings of the Seller or the Servicer" and "Bankruptcy and Creditors' Rights Issues" in this prospectus.

#### The Bonds are Legal Investments for North Carolina Investors that Require Statutory Authority
Under the Financing Act, the following North Carolina entities may legally invest any sinking funds, moneys, or other funds belonging to them or under their control in the bonds:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Subject to applicable statutory restrictions on State or local investment authority, the State of North Carolina, units of local government, political subdivisions, public bodies, and public officers, except for members of the NCUC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • banks and bankers, savings and loan associations, credit unions, trust companies, savings banks and institutions, investment companies, insurance companies, insurance associations, and other persons carrying on a banking or insurance business;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • personal representatives, guardians, trustees, and other fiduciaries; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all other persons whatsoever who are now or may hereafter be authorized to invest in bonds or other obligations of a similar nature.

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#### DEC'S FINANCING ORDER

#### DEC's Storm Recovery Financing Order
On June 18, 2025, the NCUC issued to DEC a financing order under the Financing Act. Absent an appeal, the financing order is expected to become final and non-appealable on August 19, 2025. After issuance of the bonds, the financing order, pursuant to the Financing Act, is irrevocable and is not subject to amendment, modification or termination by further action of the NCUC, except as contemplated by the periodic true-up adjustments.

The financing order authorizes the issuance of the bonds in one or more series in an aggregate principal amount not to exceed the Securitizable Balance as of the issuance date.

#### Storm Recovery Charges
*Storm Recovery Charges Will Be Imposed in Amounts Sufficient to Pay the Bonds and Related Costs.* Under the financing order, the NCUC authorizes the owner of storm recovery property to impose, bill, charge, collect, and receive a storm recovery charge, to be collected on a per kWh basis from all applicable DEC North Carolina customers until the Bonds are paid in full and all financing costs and other costs of the Bonds have been recovered in full. Such storm recovery charges are designed to be in amounts sufficient to retire the principal amount of the Bonds in accordance with the expected sinking fund schedule, to pay all interest on the Bonds when due, to pay fees and expenses of servicing the Bonds and premiums, if any, associated with the Bonds and to fund any required credit enhancement for the Bonds. Under the financing order, there is no limit on the amount of the storm recovery charge.

*Each Rate Class Will Pay a Different Storm Recovery Charge Based upon Ratemaking Cost Allocation.* Under the Financing Act and the financing order, storm recovery charges are determined by allocating the revenue requirement payable from such charges among all North Carolina customer rate classes in accordance with the cost-of-service methodology approved by the NCUC in DEC's most recently filed rate case. The storm recovery charge will be a single per kilowatt hour charge assessed against each rate class of customers as part of each customer's regular monthly billing.

The defined rate classes of customers and their respective percentage allocations of responsibility for the payment of revenue requirements to be recovered from the storm recovery charges based upon the most recently NCUC approved rate case by DEC and therefore approved in the financing order are set forth below. The initial Allocation Percentages set forth below are approximate.

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| | |
|:---|:---|
| **North Carolina Rate Class**  | **Allocation <br> Percentage\***  |
| Residential  | 66.8% |
| General Service  | 22.0% |
| Industrial Service  | 6.6% |
| Lighting  | 4.6% |
|  | 100.0% |

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\*

Percentages may not add up due to rounding.

In accordance with the Financing Act and the financing order, the allocation methodology for the storm recovery charges shall be adjusted for any changes to the customer allocation methodology approved by the NCUC in subsequent general rate case proceedings for DEC.

Although the storm recovery charges payable by each rate class of customers will differ, any deficiency in the payment of such charges by any class of customers, including write-offs or other reasons, will be included in determining the revenue requirement used in calculating the next "true-up" adjustment for all customers. Similarly, if the servicer decides to implement an interim true-up to address an expected deficiency in the payment of such charges by a particular class of customers, the expected deficiency will be included

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in determining the revenue requirement which will be allocated among all classes of customers in the true-up adjustment. Please read "DEC's Financing Order—True-Up Mechanism" below.

*The Financing Order Provides a Procedure to Calculate the Initial Storm Recovery Charge.* The initial storm recovery charges will be determined in accordance with the financing order and filed with the NCUC as part of the bond approval process described below. Please read "DEC's Financing Order—Issuance Advice Letter Process" below. As of , 2025, the approximate initial storm recovery charge for an average 1,000 kWh North Carolina residential customer to service the Bonds will be $ of the total bill. The estimated aggregate initial storm recovery charge for (1) the Bonds, and (2) the 2021 NC Storm Recovery Bonds is expected to represent approximately % of the total DEC electric bill, as of , received by a 1,000 kWh residential Customer of DEC. The storm recovery charges will become effective for all billing periods on and after the date of issue of the Bonds and will be subject to periodic true-up as described below.

*DEC Will Collect the Storm Recovery Charges as Initial Servicer.* Storm recovery charges will be assessed by DEC, as the initial servicer, for our benefit as owner of the storm recovery property. Storm recovery charges will be based on a customer's actual consumption of electricity delivered by means of DEC's transmission and distribution facilities from time to time. Storm recovery charges will be collected by DEC from customers as part of its normal collection activities. Storm recovery charges will be deposited by DEC into the collection account under the terms of the indenture, the series supplement and the servicing agreement. Estimated daily storm recovery charge collections will be remitted to the indenture trustee on each business day. The estimated payments made by DEC will be based upon the average number of days each bill remains outstanding, adjusted for any expected delinquencies. Estimated remittances will be reconciled with actual storm recovery bond collections at least semi-annually, and the overcollection or undercollection credited to or remitted by the servicer. Please read "The Servicing Agreement—Remittances to Collection Account" in this prospectus.

*Partial Payments of Storm Recovery Charges Will Be Pro-Rated.* If a customer pays only a portion of its bill, the amount collected will be prorated among all charge categories, including the storm recovery charges and any other storm recovery charges approved by the NCUC and charges of DEC, in proportion of their percentage of the overall bill.

*Corporate Consolidation*. DEC and DEP have analyzed the possibility of such a combination, and DEC anticipates beginning merger-related filings with the NCUC, the Public Service Commission of South Carolina ("**PSCSC**") and the Federal Energy Regulatory Commission ("**FERC**") in the second half of 2025. DEC is currently targeting a completion date for the merger of January 1, 2027. In the event of a corporate consolidation between DEC and DEP, the merged entity shall be deemed a successor servicer, and the storm recovery charge shall continue to be administered in a manner consistent with the financing order, applicable law, including the Financing Act, and any Commission-approved adjustments. The financing order provides in relevant part that the NCUC's review of any such merger submission shall be conducted in a manner that ensures compliance with the Financing Act and the recovery of revenues sufficient to timely pay principal of and interest on the Storm Recovery Bonds, as well as ongoing financing costs. The financing order also states that nothing in the financing order shall be construed to alter or impair and no action taken pursuant thereto shall alter or impair the rights of bondholders or the enforceability of the storm recovery property as established under the financing order and applicable law, including the Financing Act. There is no assurance that DEC and DEP will be able to obtain the approval of the NCUC or PSCSC, or other required regulatory approvals, for the potential merger.

#### True-Up Mechanism
*Storm Recovery Charges Must Be Trued-Up At Least Semi-Annually.* The Financing Act permits and the financing order requires that we, or the electric utility, file with the NCUC at least semi-annually (at least quarterly beginning twelve months prior to the scheduled final payment date of the latest maturing tranche) a letter applying the true-up mechanism to be reviewed by the NCUC for any mathematical or clerical errors to correct for any overcollection or undercollection of the storm recovery charges and make any adjustments to ensure the recovery of revenues sufficient to provide for the timely payment of the periodic payment requirement. Under the servicing agreement, the servicer will make adjustments to the storm recovery charges at least semi-annually. In addition to the semi-annual true-up adjustment, the servicer is

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authorized to make interim adjustments *at any time for any reason* to ensure the timely payment of the periodic payment requirement. Necessary true-up adjustments are to be made to correct for overcollection or undercollection of storm recovery charges or to otherwise ensure the timely payment of the periodic payment requirement. There are no caps on the level of storm recovery charges that may be imposed on customers as a result of the true-up process.

In addition to the semi-annual true-up adjustments, the servicer (a) is also required to implement quarterly true-up adjustments beginning twelve months prior to the scheduled final payment date for the latest maturing Bonds, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of principal of and interest on the Bonds and other required amounts and charges owing in connection with the Bonds on the next payment date.

Upon the filing of a true-up adjustment letter made pursuant to the financing order, the NCUC shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 30 days following the servicer's true-up filing; and that notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 30 days of the servicer's filing of a true-up adjustment letter. No potential modification to correct an error in a true-up adjustment letter shall delay its effective date and any correction or modification which could not be made prior to the effective date shall be made in the next true-up adjustment letter. Upon administrative approval or the passage of 30 days without notification of a mathematical or clerical error, no further action of the NCUC will be required prior to implementation of the true-up.

In accordance with the financing order, the Public Staff is permitted to perform a limited audit of ongoing financing costs, provided, however, that unless an adjustment to the storm recovery charge is necessary to correct for any mathematical or clerical error, the NCUC may not make any adjustments to storm recovery charges as a result of the Public Staff audit. Any other findings of the Public Staff audit shall instead be resolved at DEC's next general rate case.

*True-Up Mechanism and State Pledge.* The State of North Carolina has pledged in the Financing Act that it and its agencies, including the NCUC, will not take or permit any action that would impair the value of the storm recovery property, or, except as permitted in connection with a true-up adjustment authorized by the Financing Act, reduce, alter or impair the storm recovery charges until the principal, interest and premium, if any, and any other charges incurred and contracts to be performed in connection with the related Bonds, have been paid and performed in full.

#### Issuance Advice Letter Process
The financing order provides a procedure for approval of the process by which the storm recovery bonds will be issued and the effectiveness of the initial storm recovery charges. On the first business day after pricing of the Bonds and prior to their issuance, DEC is required to file with the NCUC an issuance advice letter, which will contain, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the actual structure of the storm recovery bond issuance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the scheduled final payment dates and legal maturities of the storm recovery bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • over-collateralization levels (if any);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any other credit enhancements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • revised estimates of the up-front financing costs proposed to be financed and estimates of the ongoing financing costs for the first collection period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • certifications as required by the financing order; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • other information specific to the storm recovery bonds from proceeds of the storm recovery bonds.

No later than noon on the third business day after pricing, the NCUC shall either accept the issuance advice letter or deliver an order to DEC to prevent the issuance of the storm recovery bonds.

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#### THE ISSUING ENTITY

#### General
The issuing entity is a limited liability company organized under the laws of the State of Delaware and is governed by an amended and restated limited liability company agreement. DEC is our sole member. We were formed on July 14, 2025.

The issuing entity has been organized to serve as a special purpose subsidiary of DEC, for the limited purpose of holding the storm recovery property and issuing the storm recovery bonds secured by the storm recovery property and the other collateral and related activities to finance certain activities of DEC related to the recovery of storm recovery costs. At the time of the issuance of the storm recovery bonds, our assets available to secure the Bonds will consist primarily of the storm recovery property and the other collateral held under the indenture and the series supplement for the storm recovery bonds. As of the date of this prospectus, the issuing entity has not carried on any business activities and has no operating history. Our limited liability company agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.

We will enter into a servicing agreement under which DEC, on our behalf, will manage, service and administer, and make collections in respect of, the storm recovery property. See "The Servicing Agreement" in this prospectus.

On or before the date of issuance of the storm recovery bonds, DEC will make a capital contribution to us in an amount not less than 0.5% of the initial principal amount of the Bonds. Under the financing order, DEC will be entitled to a return on this capital contribution equal to the rate of interest on the longest tranche of the storm recovery bond. This return will be available for distribution to DEC, subject to the priority of payment set forth in the indenture and the series supplement. See "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will Be Allocated" in this prospectus.

Our principal place of business is 525 South Tryon Street, Charlotte, North Carolina 28202. Our telephone number is 800-488-3853.

#### Managers
Pursuant to our limited liability company agreement, our business will be managed by a management committee consisting of three or more managers. Our limited liability company agreement requires that we have at least one independent manager. The independent manager must be a natural person who, for the five-year period prior to his or her appointment as an independent manager has not been and during the continuation of his or her service as independent manager is not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a member, partner, equity holder, manager, director, officer or employee of DEC or any of its equity holders or Affiliates (other than as an independent director, independent manager or special member of DEC or an Affiliate of DEC that is not in the direct chain of ownership of DEC and that is required by such DEC's creditors to be a single purpose bankruptcy remote entity); provided, that the indirect or beneficial ownership of stock of the Member or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an independent manager;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a creditor, supplier or service provider (including provider of professional services) to the issuing entity, the Member or any of their respective equity holders or Affiliates (other than a nationally-recognized company that routinely provides professional independent managers and other corporate services to the issuing entity, the Member or any of its Affiliates in the ordinary course of its business);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a family member of any such member, partner, equity holder, manager, director, officer, employee, creditor, supplier or service provider; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a Person that controls (whether directly, indirectly or otherwise) any of the bullets above.

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DEC, as our sole member, will appoint the independent manager prior to the issuance of the Bonds. None of our managers or officers has been involved in any legal proceedings which are specified in Item 401(f) of the SEC's Regulation S-K. None of our managers or officers beneficially own any equity interest in us.

The following is a list of our managers as of the date of this prospectus:

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| | | | |
|:---|:---|:---|:---|
| **Name**  | **Age**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Title**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Background**  |
| Michael P. Callahan  | 50  | Manager | Michael P. Callahan assumed his role as Senior Vice President & Treasurer of Duke Energy Corporation in 2024, after five years as State President for South Carolina. Prior to that, Mr. Callahan was Vice President of Investor Relations and in other roles since joining Duke Energy Corporation in 2002. |
| Cynthia S. Lee  | 58  | Manager | Cynthia S. Lee has served as Senior Vice President, chief Accounting Officer and Controller of Duke Energy Corporation since November 2024. Prior to that, Ms. Lee served as Vice President, Chief Accounting Officer and Controller from May 2021 to November 2024. Prior to that, Ms. Lee served as Director, Investor Relations since June 2019 and in various finance and accounting roles since joining Duke Energy Corporation in 2002. |
| Bernard J. Angelo  | 55  | Independent <br> Manager | Bernard J. Angelo joined Global Securitization Service, LLC ("GSS") in April 1997 and has extensive experience in managing commercial paper and medium term note programs. In addition to his administrative skills, he has over twenty-seven years of experience in both the business and legal side of structured finance. He has been elected to and serves on the board of directors for a number of securitization programs. At GSS, Mr. Angelo has been active in assisting clients and their legal counsel during the structuring phase of their transactions as well as assimilating bank-sponsored commercial paper programs into the operating matrix at GSS. Prior to joining GSS, Mr. Angelo was an Assistant Vice President at Bankers Trust Company from January 1993 to April 1997 where he was responsible for oversight of the treasury and accounting functions on the Corporate Trust side of structured transactions managed by the bank. He has a B.S. in Finance from Siena College. Mr. Angelo serves as an independent director for our affiliates, Duke Energy Florida Project Finance, LLC, Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress NC Storm Funding LLC, and Duke Energy Progress SC Storm Funding LLC. |

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No compensation has been paid to any manager since we were formed. Our managers, other than any independent manager, are officers, directors or managers of DEC or its other affiliates and have not been and will not be separately compensated by us for their services on our behalf. We will pay the independent manager annual fees from our revenues and will reimburse such independent manager for reasonable and documented expenses These expenses include the reasonable compensation, expenses and disbursements

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of the agents, representatives, experts and counsel that the independent manager may employ in connection with the exercise and performance of their rights and duties under our limited liability company agreement, the indenture, the series supplement, the sale agreement and the servicing agreement.

The issuing entity's limited liability company agreement provides that the managers will not be personally liable for any of our debts, obligations or liabilities to the extent permitted by law. Our limited liability company agreement further provides that, to the fullest extent permitted by law, we will indemnify the managers against any liability incurred in connection with their services as managers for us except if caused by the manager's fraud, gross negligence or willful misconduct or in the case of an independent manager, bad faith or willful misconduct. We will pay any indemnification amounts owed to managers out of funds in the collection account, subject to the priority of payments described in "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will Be Allocated" in this prospectus.

#### Restricted Purposes
We have been created for the limited purpose of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • acquiring, owning, holding, administering, servicing or entering into agreements regarding the receipt and servicing of the storm recovery property and the other collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • managing, selling, assigning, pledging, collecting amounts due on or otherwise deal with the storm recovery property and the other collateral and related assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • negotiating, authorizing, executing, delivering, assuming the obligations under, and perform its duties under, the basic documents and any other agreement or instrument or document relating to the activities set forth in the above bullets; provided, that each party to any such agreement under which material obligations are imposed upon DEC NC Storm Funding II shall covenant that it shall not, prior to the date which is one year and one day after the termination of the indenture and the payment in full of the storm recovery bonds and any other amounts owed under any indenture, acquiesce, petition or otherwise invoke or cause DEC NC Storm Funding II to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against DEC under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of DEC or any substantial part of the property of DEC NC Storm Funding II; or ordering the winding up or liquidation of the affairs of DEC NC Storm Funding II; and provided, further, that DEC NC Storm Funding II shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • filing with the SEC a registration statement, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act, as amended (including any prospectus supplement, prospectus and exhibits contained therein) and file such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register the storm recovery bonds under the securities or "Blue Sky" laws of various jurisdictions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • distributing amounts released to the issuing entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • making payment on the storm recovery bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • after the Bonds have been paid in full and discharged, and upon payment of all remaining ongoing financing costs, distributing all remaining amounts in the collection account to DEC; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • engaging in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.

The issuing entity's limited liability company agreement does not permit us to engage in any activities not directly related to these purposes, including issuing or investing in additional securities, borrowing money or making loans to other persons. The list of permitted activities set forth in our limited liability company agreement may not be altered, amended or repealed without the affirmative vote of a majority of our

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managers, which vote must include the affirmative vote of our independent manager. Our limited liability company agreement and the indenture will prohibit us from issuing any storm recovery bonds (as such term is defined in the Financing Act), other than the Bonds that we will offer pursuant to this prospectus.

In addition, our organizational documents require us to operate in a manner intended to reduce the likelihood that we would be consolidated in DEC's bankruptcy estate if DEC becomes involved in a bankruptcy proceeding. We have no intent to file a voluntary petition for relief under the Bankruptcy Code, so long as we are solvent and do not reasonably foresee becoming insolvent.

#### DEC NC Storm Funding II's Relationship with DEC
On the issue date of the Bonds, DEC will sell storm recovery property to us pursuant to the sale agreement between us and DEC. DEC will service such storm recovery property pursuant to a servicing agreement between us and DEC related to the Bonds. Please read "The Sale Agreement" and "The Servicing Agreement" in this prospectus. DEC will provide certain administrative services to us, pursuant to an administration agreement.

Our Bonds will be included on the consolidated balance sheet of our parent, DEC, a regulated public utility, as required by the Financial Accounting Standards Board and the SEC Office of Chief Accountant governing corporate financial reporting for investor-owned utilities.

Our Bonds will be treated as debt of DEC for U.S. federal income tax purposes. See "Material U.S. Federal Income Tax Consequences" in this prospectus. For U.S. federal income tax purposes, DEC will not recognize gross income unless and until DEC bills customers for the storm recovery charges and only in connection with such billing of customers for such storm recovery charges.

#### Ongoing NCUC Oversight
The Issuing Entity is responsible to the NCUC on an ongoing basis to the extent provided in our organization documents and the transaction documents. The servicer, on our behalf, will file periodic adjustments to storm recovery charges with the NCUC. In addition, under the terms of the financing order, the Issuing Entity and the indenture trustee are not permitted to waive any material obligation of DEC as transferor or as servicer of the storm recovery property under the transaction documents without the express written consent of the NCUC.

#### Continuing Disclosure: SEC Filings
We plan to file with the SEC required periodic and current reports related to the Bonds consistent with the disclosure and reporting regime established in Regulation AB and will also post those periodic and current reports at a website associated with us or our affiliates.

#### DEC NC Storm Funding II is a Separate and Distinct Legal Entity
Under our limited liability company agreement, we may not file a voluntary petition for relief under the Bankruptcy Code without a unanimous vote of our managers, including the independent manager. DEC has agreed that it will not cause us to file a voluntary petition for relief under the bankruptcy code without the affirmative vote of DEC and a unanimous vote of our mangers, including the independent manager. Our limited liability company agreement requires us to maintain our existence separate from DEC including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • taking all reasonable steps to continue our identity as a separate legal entity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • making it apparent to third persons that we are an entity with assets and liabilities distinct from those of DEC, other affiliates of DEC, the managers or any other person and correcting any known misunderstandings; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • making it apparent to third persons that, except for federal and certain other tax and accounting purposes, we are not a division of DEC or any of its affiliated entities or any other person.

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The separateness provisions in our limited liability company agreement may be amended by us, with the affirmative vote of the independent manager, and DEC with written notice to the indenture trustee, as well as satisfaction of the rating agency condition and the NCUC condition (described below). Please read "Description of the Storm Recovery Bonds—Procedure for Obtaining Consent or Deemed Consent of the NCUC."

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#### THE ADMINISTRATION AGREEMENT
Pursuant to an administration agreement between DEC and us, DEC will provide or arrange for the provision of administrative services to us, including services relating to the required filings with the SEC with respect to the Bonds, any financial statements or tax returns we might be required to file, qualifications to do business, and minutes of our managers' meetings. We will pay DEC a fixed fee of $50,000 per annum for performing such services described above, plus out-of-pocket expenses. These out-of-pocket expenses shall be all costs and expenses of services performed by unaffiliated third parties and actually incurred by the administrator in connection with the performance of its obligations under the administration agreement (but for the avoidance of doubt, excluding any such costs and expenses incurred by DEC in its capacity as servicer). There is no limit on the amount of these out-of-pocket expenses, and they will be recovered as ongoing financing costs through the collection of the storm recovery charges and paid in accordance with the payment waterfall in the Indenture. Please read "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will be Allocated." The $50,000 fee will be paid annually in arrears. The administrator may not resign or be removed without satisfaction of the rating agency condition and the NCUC condition as set forth in the Administration Agreement, and without the successor administrator assuming all of the obligations of the former administrator under the administration agreement.

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#### RELATIONSHIP TO 2021 NC STORM RECOVERY BONDS
DEC served as sponsor and has acted as servicer with respect to $237,210,000 original aggregate principal amount of the 2021 NC Storm Recovery Bonds, issued on November 24, 2021 which were issued to reimburse itself for the North Carolina portion of previously incurred storm recovery costs relating to Hurricanes Florence, and Michael and Winter Storm Diego in North Carolina. The 2021 NC Storm Recovery Bonds are still outstanding. All scheduled interest and principal payments on the 2021 NC Storm Recovery Bonds have been paid on a timely basis from the date of issuance of the 2021 NC Storm Recovery Bonds through the date of this prospectus.

The underlying structures of the 2021 NC Storm Recovery Bonds is comparable to the underlying structure of the Bonds in that DEC, pursuant to the authority granted by the NCUC in a financing order, created property, namely, the right to impose, collect and receive storm recovery charges necessary to make timely payments of principal and interest and other ongoing financing costs of the 2021 NC Storm Recovery Bonds in accordance with their expected sinking fund schedule.

The issuing entity of the 2021 NC Storm Recovery Bonds will have no obligations under the Bonds, and the Issuing Entity will have no obligations under the 2021 NC Storm Recovery Bonds. The security pledged to secure the Bonds will be separate from the separate security that is securing the 2021 NC Storm Recovery Bonds. Although the 2021 NC Storm Recovery Bonds and the Bonds each will have its own separate storm recovery property and are issued by different issuing entities, storm recovery charges relating to each issuing entity will be collected through single bills to customers of DEC, to the extent such storm recovery charge applies to such customer. In the event a customer does not pay in full all amounts owed under any bill including storm recovery charges, DEC is required to allocate any resulting shortfalls in storm recovery charges prorated based on the amounts of Storm Recovery Charges owing to the Issuing Entity in respect of the Bonds, any storm recovery charges owing in respect of the 2021 NC Storm Recovery Bonds, any charges owing with respect to any future storm recovery bonds issued by affiliates of DEC, and any other charges owing to DEC in proportion to their percentage of the overall bill. Please read "The Servicing Agreement—Remittances to Collection Account".

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#### DUKE ENERGY CAROLINAS, LLC

#### The Depositor, Sponsor, Seller and Servicer
DEC will be the seller and initial servicer of the Bonds and will be the depositor and sponsor of the transaction in which Bonds covered by this prospectus are issued. DEC is a regulated public utility primarily engaged in the generation, transmission, distribution, and sale of electricity in portions of North Carolina, including the greater Charlotte, Durham, Greensboro, and Winston-Salem areas. DEC's service area in North Carolina and South Carolina covers approximately 24,000 square miles and supplies electric service to approximately 2.4 million residential, general service and industrial service customers. During the year ended December 31, 2024, DEC billed approximately 58.8 billion kilowatt hours of electricity to its electric customers in North Carolina, resulting in revenues of approximately $6.4 billion. DEC is an indirect, wholly-owned subsidiary of Duke Energy Corporation, whose shares are listed on the New York Stock Exchange. Both we and DEC are identified by Standard Industrial Classification Code No. 4911, "Electric Services".

DEC is subject to the jurisdiction of the NCUC with respect to retail utility rates, accounting, utility services, certain facilities, certain asset transfers, certain corporate mergers and other matters. DEC is subject to the jurisdiction of the Federal Energy Regulatory Commission under the Federal Power Act with respect to acquisitions, operations and disposals of certain assets and facilities, services provided and rates charged, conduct among affiliates and other matters.

Following the sale of the storm recovery property to us, DEC will have no ownership or other interest in the storm recovery property transferred to us and will have no right to receive any storm recovery charges (other than collected as servicer on our behalf). Neither DEC nor any of its affiliates will purchase any Bonds.

#### Revenues, Customer Base and Energy Consumption
The table below sets forth DEC's total billed retail revenues from retail sales of electrical energy to its North Carolina customers for the years 2020 to 2024:

#### Billed Retail Total Revenues ($ in 000's) (by rate class)

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Rate Class**  | &nbsp;&nbsp;&nbsp;&nbsp; **2020**  | &nbsp;&nbsp;&nbsp;&nbsp; **2021**  | &nbsp;&nbsp;&nbsp;&nbsp; **2022**  | &nbsp;&nbsp;&nbsp;&nbsp; **2023**  | &nbsp;&nbsp;&nbsp;&nbsp; **2024**  |
| Residential  | $2222421 | $2269551 | $2329136 | $2516736 | $3102776 |
| General Service  | 1617065 | 1622985 | 1735416 | 1956174 | 2259800 |
| Industrial Service  | 667682 | 699838 | 726244 | 778280 | 902200 |
| Lighting  | 35460 | 60468 | 136594 | 150058 | 186492 |
| &nbsp;&nbsp;&nbsp; **Total**  | $**4542628** | $**4652842** | $**4927390** | $**5401248** | $**6451268** |

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The table below sets forth the number of North Carolina customers by class for the years 2020 to 2024:

#### Average Number of Retail Customer Accounts (by rate class)

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Rate Class**  | &nbsp;&nbsp;&nbsp;&nbsp; **2020**  | &nbsp;&nbsp;&nbsp;&nbsp; **2021**  | &nbsp;&nbsp;&nbsp;&nbsp; **2022**  | &nbsp;&nbsp;&nbsp;&nbsp; **2023**  | &nbsp;&nbsp;&nbsp;&nbsp; **2024**  |
| Residential  | 1807739 | 1816172 | 1817149 | 1861484 | 1919569 |
| General Service  | 275142 | 278983 | 278663 | 282135 | 287677 |
| Industrial Service  | 4751 | 4775 | 4625 | 4654 | 4665 |
| Lighting  | 17401 | 65521 | 220976 | 220956 | 222317 |
| &nbsp;&nbsp;&nbsp; **Total**  | **2105033** | **2165451** | **2321413** | **2369229** | **2434228** |

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The table below sets forth DEC's billed retail energy sales to its North Carolina customers for the years 2020 to 2024:

#### Electric Usage (Billed GWh) (by rate class)

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Rate Class**  | &nbsp;&nbsp; **2020**  | &nbsp;&nbsp; **2021**  | &nbsp;&nbsp; **2022**  | &nbsp;&nbsp; **2023**  | &nbsp;&nbsp; **2024**  |
| Residential  | 21396 | 22379 | 22375 | 21544 | 22503 |
| General Service  | 22113 | 22835 | 23794 | 23742 | 24021 |
| Industrial Service  | 11398 | 12268 | 12310 | 11675 | 11744 |
| Lighting  | 262 | 334 | 580 | 569 | 558 |
| &nbsp;&nbsp;&nbsp; **Total**  | **55169** | **57816** | **59059** | **57530** | **58826** |

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#### Percentage Concentration within DEC's Large Commercial and Industrial Customers
For the year ended December 31, 2024, the ten largest retail electric customers represented approximately 7.1% of DEC's retail kilowatt-hour sales. The ten largest customers are in the commercial and industrial rate classes. There are no material concentrations in the residential class. As of the date of this prospectus, no customer or group of related customers will be obligated to pay more than 10% of the storm recovery charges.

#### Estimated Consumption and Estimate Variance
DEC's calculation of the initial storm recovery charges and subsequent adjustments are based on electricity consumption estimates for each customer rate class. Pursuant to FERC guidance, each customer is included in a customer revenue class and billed in accordance with NCUC-approved rate tariffs which correlate to the rate classes disclosed herein depending on the type of service provided. There is no direct correlation between revenue class and rate class, with the exception of residential customers who are in both the residential revenue class and residential rate class. Individual customers within each customer revenue class will be billed for storm recovery charges based on their consumption. DEC will use these estimates to calculate and set the storm recovery charges at levels to ensure revenues sufficient to pay interest on and principal of the Bonds when due, to pay fees and expenses of servicing and retiring the Bonds and to replenish the capital subaccount. With respect to the foregoing, interest is due on each payment date and principal for a specific tranche is due upon the final maturity date for such tranche. See "Description of the Storm Recovery Bonds—Events of Default; Rights Upon Event of Default" in this prospectus.

DEC conducts sales estimate variance analyses on a regular basis to monitor the accuracy of energy sales estimates against recorded weather-adjusted consumption (adjusted to remove the impacts of weather). The table below presents estimates of the billed retail energy sales in GWh for the years 2020 through 2024 compared to weather-adjusted consumption for such periods. Each estimate was made in the prior year.

#### Estimate Variances (by customer revenue class) Weather-Adjusted Consumption Variance for Ultimate Electric Delivery (GWh)

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **2020**  | **2021**  | **2022**  | **2023**  | **2024**  |
| **Residential** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Weather Adjusted  | 28238 | 28665 | 30042 | 30983 | 30610 |
| &nbsp;&nbsp;&nbsp; Forecast.  | 29129 | 29532 | 30023 | 29704 | 30210 |
| &nbsp;&nbsp;&nbsp; *Variance*  | *(891)* | *(867)* | *19* | *1279* | *400* |
| **General Service** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Weather Adjusted  | 29836 | 29555 | 28548 | 28972 | 29963 |
| &nbsp;&nbsp;&nbsp; Forecast.  | 27713 | 28847 | 30109 | 30054 | 30575 |
| &nbsp;&nbsp;&nbsp; *Variance*  | *2123* | *708* | *(1561)* | *(1082)* | *(612)* |
| **Industrial Service** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Weather Adjusted  | 21760 | 20448 | 20946 | 22158 | 20253 |
| &nbsp;&nbsp;&nbsp; Forecast.  | 19602 | 20646 | 20982 | 19722 | 19713 |
| &nbsp;&nbsp;&nbsp; *Variance*  | *2158* | *(198)* | (36) | 2436 | 540 |

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **2020**  | **2021**  | **2022**  | **2023**  | **2024**  |
| **Lighting** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Weather Adjusted  | 319 | 284 | 279 | 290 | 290 |
| &nbsp;&nbsp;&nbsp; Forecast.  | 317 | 299 | 300 | 278 | 268 |
| &nbsp;&nbsp;&nbsp; *Variance*  | *2* | *(15)* | *(21)* | *12* | *22* |
| **Total** |  |  |  |  |  |
| &nbsp;&nbsp;&nbsp; Weather Adjusted  | 80154 | 78952 | 79815 | 82402 | 81115 |
| &nbsp;&nbsp;&nbsp; Forecast.  | 76761 | 79325 | 81414 | 79759 | 80766 |
| &nbsp;&nbsp;&nbsp; *Variance*  | *3393* | *(373)* | *(1599)* | *2643* | *349* |

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Actual consumption depends on several factors, including temperatures and economic conditions. For example, while DEC's methodology for estimating consumption assumes normal weather conditions, abnormally hot summers or cold winters can add growth in electricity sales, while conversely, abnormally cool summers or warm winters can suppress growth in electricity consumption. Regional economic conditions can also affect consumption as retail customers curb electricity consumption to save money, businesses close and retail customers migrate to other service territories. Accordingly, variations in weather conditions will affect the accuracy of any estimate.

#### Billing and Collections
The storm recovery charges collected from DEC's North Carolina customers' electricity bills, without exception, must be remitted on a daily basis to the indenture trustee. Under the irrevocable financing order, the NCUC, as directed by the Financing Act, will implement the true-up mechanism for making any adjustments that are necessary to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of principal of and interest on the Bonds when due and other financing costs and other required amounts and charges payable in connection with the Bonds.

*Credit Policy.* DEC is required to provide transmission and distribution service to all qualified customers. DEC verifies all customers to ensure validity and searches its customer information system to determine whether DEC has previously served the customer. Certain accounts are secured with deposits if warranted. The amount of the deposit reflects the estimated use over a two-month period, which is what the North Carolina Administrative Code allows DEC to collect.

<u>Residential Accounts</u> 

First time customers establishing residential electric accounts are required to pay a deposit. As a courtesy, DEC may waive the residential deposit requirement if the customer's overall external credit score meets a specific score threshold. If a deposit is required, electric service is not connected until the deposit is paid. Returning residential customers and existing residential customers connecting additional residential accounts may be required to satisfy the deposit requirement if the credit score warrants. Internal credit is not considered for additional service or returning customers.

Residential customers are cross-referenced in the customer information system to search for unsatisfied debt. If a returning customer left unsatisfied debt, the unpaid bill must be satisfied prior to connecting service.

DEC offers a guarantee contract for residential accounts as a cash alternative, when a deposit is required. The applicant must secure a guarantor who has established service with DEC for greater than two years with no more than one delinquent payment within the immediate twelve months. The guarantor must pass the external credit score threshold to assume additional risk. The guarantor must provide a thirty-day written notice cease responsibility. This time period allows for securing a cash deposit (or another guarantor) for the applicant. In the event of default, the debt is reported on the consumer credit reports for both the applicant and guarantor (as co-signer).

<u>Non-Residential Accounts</u> 

Non-residential accounts are required to pay a deposit per service point (meter). As a general rule, non-residential accounts require deposit coverage. First time customers establishing non-residential accounts must

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pay the deposit requirement prior to connecting service. Current non-residential customers connecting additional service points may be offered the option of billing the deposit if their credit record allows. Consumer credit is not used to determine credit worthiness on non-residential accounts. Existing residential customers turning on non-residential accounts cannot use their satisfactory payment record to reduce or eliminate the deposit requirement. Credit history for each is mutually exclusive. DEC's Retail Tariff prohibits disconnecting service for a different class of service; therefore, unpaid non-residential balances cannot be transferred to active residential accounts for collection. On an exceptional basis, commercial credit reports may be utilized to aid in deposit decision. DEC uses Moody's or S&P for publicly traded companies, audited financials for privately held companies, and Experian Intelliscores for small to mid-sized companies to evaluate credit history.

Non-residential deposits may be satisfied with cash or a cash alternative such as a surety bond or irrevocable letter of credit. Deposit coverage remains in force for the life of the account. Surety bonds and irrevocable letters of credit are issued by surety (insurance) companies and banks which have their own specific criteria defining credit worthiness. Customers applying for those forms of coverage must meet the third party's qualifications. In the event of the cash alternative cancellation, DEC requires that the third-party give a minimum 60-day notification by certified, returned receipt mail. The minimum 60 days is required in order to secure another form of deposit prior to cancellation to limit risk. DEC's process is to bill a cash deposit within 24 hours of receipt of cash alternative cancellation. Electric service may be interrupted if deposit is not secured.

*Billing Process.* DEC bills its customers once every 26 to 34 days and distributes approximately an equal number of bills each business day. For the year ended December 31, 2024, DEC rendered an average of approximately 112,279 bills on each business day to its customers. For accounts with potential billing error exceptions, reports are generated for manual review. This review examines accounts that have abnormally high or low bills, potential meter-reading errors and possible meter malfunctions.

Approximately 171,165 residential customers, which constitute approximately 8% of DEC's residential customers, choose to be billed using DEC's budget billing program. For these customers, DEC determines and bills a monthly budget based on the last twelve months of billing history for each account. The budget amount is reviewed annually and adjusted if customer usage has changed more than a predetermined amount. Overpayments or underpayments for actual consumption during the prior year are reconciled on each customer's monthly bill.

*Collection and Write-Off Policy.* DEC receives approximately 16% of its total bill payments via U.S. mail. Approximately 82% of bill payments are received via electronic payments. DEC receives the remainder of payments via third-party pay agents and field collection. Bills are due 25 calendar days after the issue date at which time they are considered delinquent. Delinquent customers are sent an "important notice" to encourage payment within 7 business days. Accounts become eligible for disconnect after the passage of these 7 business days. Disconnect orders are issued after the 7 business day period and are executed within 7 business days. For the year ended December 31, 2024, approximately 0.686% of total billed retail revenue became eligible for disconnect and 51% was disconnected. Approximately 71%of accounts disconnected for nonpayment ultimately make full payment and have service restored.

If service is terminated, the customer is required to pay all final noticed amounts as well as a $8.56 reconnection fee in order to resume service as of July 21, 2024. The reconnect fee may be billed to the account. After service termination due to non-payment a final bill including all unpaid amounts and net of deposits paid is issued within 10 business days. After service termination by customer request, a final bill including all unpaid amounts and net of deposits paid is issued within 1 business day. Unpaid final bills are written off approximately 71 days after the final bill is issued. Amounts written off are assigned to outside collection agencies and are reported to all three credit reporting agencies. Dollars recovered are netted against actual write-offs.

DEC may change its credit, billing, collections and termination/restoration of service policies and procedures from time to time. It is expected that any such changes would be designed to enhance DEC's ability to bill and collect customer charges on a timely basis. Please read "Risk Factors—Servicing Forecasting Risks—Changes to billing, collection and posting practices might reduce the value of your investment in the Bonds" in this prospectus.

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*Loss Experience*. The following table sets forth information relating to DEC's annual net write-offs for all retail customers for the years 2020 to 2024:

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **2020**  | **2021**  | **2022**  | **2023**  | **2024**  |
| Billed Electric Revenues ($ in millions)  | $6338.3 | $6378.2 | $6759.5 | $7.408.6 | $8694.6 |
| Net Write-offs ($ in millions)  | $13.1 | $22.8 | $74.6 | $73.6 | $58.4 |
|  ***Percentage of Billed Retail Revenues(1)***  | ***0.20%*** | ***0.36%*** | ***1.10%*** | ***0.99%*** | ***0.67%*** |

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(1) Segregated numbers between North Carolina retail customers and South Carolina retail customers are unavailable.

From 2020 to current, DEC's annual ratios of net write-offs to billed retail revenues have been between 0.20% and 1.10%. DEC is not aware of any material factors, other than the impact of COVID-19, a slow economy and higher energy prices that caused these annual ratios to vary.

DEC determines a customer's account to be inactive on the date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the customer gives notice requesting discontinuance of service;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a new customer applies for service at a location where the customer of record has not yet discontinued service; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the customer's service remains off after non-payment.

DEC's policy is to write-off an inactive account to bad debt expense approximately 30 days after the date the account is final billed if payment has not been received. The effect of all write-offs and delinquencies are taken into account in the true-up mechanism.

***Days Revenue Outstanding***. The following table sets forth information relating to the average number of days all retail customer electricity bills remained outstanding for the years 2020 through 2024:

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| | | | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|:---|
| | **2020**  | **2020**  | **2021**  | **2021**  | **2022**  | **2022**  | **2023**  | **2023**  | **2024**  | **2024**  |
| Average number of days outstanding  |  | 27 |  | 32 |  | 37 |  | 32 |  | 32 |

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***Delinquencies as a Percentage of Total Billed Revenues***. The following table sets forth information relating to the delinquencies as a percentage of total billed revenues for all classes of customers of DEC on December 31st of years 2020 to 2024. Payments are aged when the following month's bill is rendered. This historical information is presented because DEC's actual accounts receivable aging experience may affect the amounts charged-off, and consequently the total amounts remitted, that arise from the storm recovery charges.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | **December 31,**  | **December 31,**  | **December 31,**  | **December 31,**  | **December 31,**  |
| | **2020**  | **2021**  | **2022**  | **2023**  | **2024**  |
| Total accounts receivable aging (% of total outstanding) After: |  |  |  |  |  |
| 30 – 59 days  | 11.8 | 12.8 | 9.6 | 11.3 | 10.1 |
| 60 – 89 days  | 3.8 | 5.3 | 4.1 | 3.3 | 3.8 |
| 90+ days  | 13.7 | 21.8 | 15.1 | 8.7 | 9.5 |
| Total  | 29.3 | 39.9 | 28.8 | 23.3 | 23.4 |

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The accounts receivable aging experience for DEC has deteriorated from 2020 to 2022 and has improved on 2023 and 2024. DEC is not aware of any material factors, other than the impact of COVID-19, a slow economy and higher energy prices that caused the accounts receivable aging experience to vary.

#### Prior Storm Recovery Charge Experience, Sponsor Experience or Servicing Experience Relating to Storm Recovery Charges
DEC has prior experience as a securitization sponsor and the servicer for a series of storm recovery bonds issued in 2021 by Duke Energy Carolinas NC Storm Funding LLC. Furthermore, DEC is highly

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experienced in calculating and implementing rates and charges under various cost recovery riders and billing those amounts to customers. These riders include a coal inventory rider, excess deferred income tax rider, renewable energy rider, energy efficiency rider/demand side management rider, joint municipal power agency rider and competitive procurement of renewable energy rider. These riders are subject to regular and periodic true-up, including filing with and review and approval by the NCUC. The calculation of storm recovery charges and related billings will follow essentially the same processes as the other cost recovery riders. Though these charges are not remitted to a subsidiary, the method of calculating, imposing and collecting is the same.

Though storm recovery property is not a receivable, DEC is currently the originator, seller and servicer under a financing arrangement involving the sale of accounts receivable from its customers. In its capacity as servicer, DEC has serviced the collections of receivables from its customers as well as managed the intercreditor arrangements among the different parties for that transaction.

In addition, DEC's affiliates, Duke Energy Florida, LLC sponsored and is the servicer for a series of nuclear asset recovery bonds issued in 2016 by Duke Energy Florida Project Financing LLC and Duke Energy Progress, LLC, sponsored and is the servicer for two series of storm recovery bonds: one issued in 2021 by Duke Energy Progress NC Storm Funding LLC and the second in 2024 by Duke Energy Progress SC Storm Funding LLC.

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#### DESCRIPTION OF THE STORM RECOVERY BONDS
 *The following summary describes the material terms of the Bonds, the indenture and the series supplement. The forms of the bond, the indenture and the series supplement have been filed as exhibits to the registration statement of which this prospectus forms a part. Please read "Where You Can Find More Information" in this prospectus.* 

We will issue the Bonds and secure their payment under an indenture and the series supplement that we will enter into with U.S. Bank Trust Company, National Association, as indenture trustee, referred to in this prospectus as the "**indenture trustee**". We will issue the Bonds in minimum denominations of $2,000 and in integral multiples of $1,000 in excess thereof, except that we may issue one bond in such tranche in a smaller denomination. The initial principal balance, scheduled final payment date, final maturity date and interest rate for such tranche of the Bonds are stated in the table below.

#### General
The Bonds will be issued in authorized denominations of $2,000 and in integral multiples of $1,000 above that amount, except that one bond may be in a smaller denomination. We expect to issue the Bonds in one series consisting of tranches designations with an associated expected sinking fund schedule, but we may issue the Bonds in a different number of tranches depending on pricing considerations. The principal amounts, interest rates, scheduled payment dates, and final maturity dates are listed below. The scheduled final payment date for the Bonds is the date by which we expect to pay in full all interest and principal. The final maturity date of the Bonds is the legal maturity date. The failure to pay principal of the Bonds by the scheduled final payment date will not be an event of default under the indenture and the series supplement. An event of default would occur if there is a failure to pay principal for any tranche on the final legal maturity date for such tranche. True-up adjustments will occur at least semi-annually or more frequently as necessary to maintain the expected sinking fund schedule.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **Tranche**  | **Expected <br> Weighted <br> Average <br> Life <br> (Years)**  | **Principal <br> Amount <br> Offered**  | &nbsp;&nbsp;&nbsp; **Scheduled <br> Final <br> Payment <br> Date**  | &nbsp;&nbsp; **Final <br> Maturity <br> Date**  | &nbsp;&nbsp; **Interest <br> Rate**  |
|  |  |  | $— |  | &nbsp;&nbsp;% |
|  |  |  | $— |  | &nbsp;&nbsp;% |
|  |  |  | $— |  | &nbsp;&nbsp;% |

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All Bonds will be payable solely from, and secured solely by, a pledge of and lien on the storm recovery property and the other collateral relating to the Bonds as provided in the indenture and the series supplement. The Bonds will be nonrecourse obligations, secured only by the collateral. See "Security for the Storm Recovery Bonds—Pledge of Collateral" in this prospectus. The Bonds will not constitute a debt, liability or other obligation of, or interest in, DEC or any of its other affiliates (other than us).The Bonds will not be insured or guaranteed by DEC, including in capacity as sponsor, depositor, seller or servicer, or by its parent, Duke Energy Corporation, any of their respective affiliates, the indenture trustee or any other person or entity. The Bonds will not be a debt or general obligation of the State of North Carolina or any of its political subdivisions, agencies, or instrumentalities, nor are they special obligations or indebtedness of the State of North Carolina or an agency or political subdivision.

#### Interest Payments Generally
Beginning , 20 , we are required to pay interest semi-annually on the Bonds on each and (or, if any payment date is not a business day, the following business day) of each year. The record date (so long as the Bonds are evidenced by book-entry) for any payment of interest on and principal of the Bonds will be the business day immediately before the applicable payment date.

Interest on each tranche of Bonds will accrue from, and including, the issue date to, but excluding, the first payment date, and thereafter from and including the previous payment date to (but excluding) the applicable payment date until the Bonds have been paid in full, at the interest rate indicated in the table on

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the cover page of this prospectus and in the table above. Each of those periods is referred to as an "**interest accrual period**". We will calculate interest on each tranche of the Bonds on the basis of a 360-day year of twelve 30-day months.

On each payment date, we will pay interest on each tranche of the Bonds equal to the following amounts:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • accrued interest on the principal balance of such tranche of the Bonds as of the close of business on the preceding semi-annual payment date, or the date of the original issuance of the Bonds, after giving effect to all payments of principal made on the preceding semi-annual payment date, if any; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • if there has been a payment default, any interest payable but unpaid on any prior payment date, together with interest on such unpaid interest, if any.

On each payment date, we will pay interest on the Bonds before we pay principal on the Bonds.

If there is a shortfall in the amounts available in the collection account to make interest payments on the Bonds, the indenture trustee will distribute interest pro rata to each tranche of Bonds based on the amount of interest payable on each such outstanding tranche. Please read "Security for the Bonds—How Funds in the Collection Account will be Allocated" in this prospectus.

#### Principal Payments
On each payment date, we will pay principal of the Bonds to the bondholders equal to the sum, without duplication, of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the unpaid principal amount of any Bond whose final maturity date is on that payment date, plus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the unpaid principal amount of any Bond upon acceleration following an event of default relating to the Bonds, plus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any overdue payments of principal, plus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any unpaid and previously scheduled payments of principal, plus

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the principal scheduled to be paid on any bond on that payment date,

but only to the extent funds are available in the collection account after payment of certain of our fees and expenses and after payment of interest as described above under "—Interest Payments Generally" in this prospectus. If the indenture trustee receives insufficient collections of storm recovery charges for any payment date, and amounts in the collection account (and the applicable subaccounts of the collection account) are not sufficient to make up the shortfall, principal of any tranche of Bonds may be payable later than expected. Please read "Risk Factors—Other Risks Associated with the Purchase of the Bonds" in this prospectus. To the extent funds are so available, we will make scheduled payments of principal of the Bonds in the following order:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1)

to the holders of the tranche Bonds, until the principal balance of that tranche has been reduced to zero,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2)

to the holders of the tranche Bonds, until the principal balance of that tranche has been reduced to zero, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3)

to the holders of the tranche Bonds, until the principal balance of that tranche has been reduced to zero.

However, on any payment date, unless an event of default has occurred and is continuing and the Bonds have been declared due and payable, the indenture trustee will make principal payments on the Bonds only until the outstanding principal balances of the Bonds have been reduced to the principal balances specified in the applicable expected sinking fund schedule for that payment date. Accordingly, principal of the Bonds may be paid later, but not sooner, than reflected in the expected sinking fund schedule, except in the case of an acceleration. The entire unpaid principal balance of each tranche of the Bonds will be due and

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payable on the final maturity date for that tranche. The failure to make a scheduled payment of principal on the Bonds because there are not sufficient funds in the collection account does not constitute a default or an event of default under the indenture, except for the failure to pay in full the unpaid balance of any tranche upon the final maturity date for such tranche.

Unless the Bonds have been accelerated following an event of default, any excess funds remaining in the collection account after payment of principal, interest, applicable fees and expenses and payments to the applicable subaccounts of the collection account will be retained in the excess funds subaccount until applied on a subsequent payment date.

If an event of default (other than a breach by the State of North Carolina of the state pledge) has occurred and is continuing, then the indenture trustee or the holders of not less than a majority in principal amount of the Bonds then outstanding may declare the Bonds to be immediately due and payable, in which event the entire unpaid principal amount of the Bonds will become due and payable. Please read "—Events of Default; Rights Upon Event of Default" in this prospectus. However, the nature of our business will result in payment of principal upon an acceleration of the Bonds being made as funds become available. Please read "Risk Factors—Risks Associated With the Unusual Nature of the Storm Recovery Property—Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the Bonds before maturity might result in your investment being repaid either earlier or later than expected" and "Risk Factors—You might experience material payment delays as a result of limited sources of payment for the Bonds and limited credit enhancement" in this prospectus.

If there is a shortfall in the amounts available to make principal payments on the Bonds that are due and payable, including upon an acceleration following an event of default, the indenture trustee will distribute principal from the collection account pro rata to each tranche of Bonds based on the principal amount then due and payable on the payment date; and if there is a shortfall in the remaining amounts available to make principal payments on the Bonds that are scheduled to be paid, the indenture trustee will distribute principal from the collection account pro rata to each tranche of Bonds based on the principal amount then scheduled to be paid on the payment date.

The expected sinking fund schedule below sets forth the corresponding principal payment that is scheduled to be made on each payment date for each tranche of the Bonds from the issuance date to the scheduled final payment date. Similarly, the expected sinking fund schedule below sets forth the principal balance that is scheduled to remain outstanding on each payment date for each tranche of the Bonds from the issuance date to the scheduled final payment date.

#### Expected Sinking Fund Schedule(1)

---

| | | | |
|:---|:---|:---|:---|
| **Semi-Annual Payment Date**  | **Tranche <br> Principal <br> Balance**  | **Tranche <br> Principal <br> Balance**  | **Tranche <br> Principal <br> Balance**  |
| Closing Date  |  |  |  |

---

(1) Totals may not add due to rounding.

We cannot assure you that the principal balance of any tranche of the Bonds will be reduced at the rate indicated in the table above. The actual reduction in tranche principal balances may occur more slowly. The actual reduction in tranche principal balances will not occur more quickly than indicated in the above table, except in the case of acceleration due to an event of default under the indenture. The Bonds will not be in default if principal is not paid as specified in the schedule above unless the principal of any tranche is not paid in full on or before the final maturity date of that tranche.

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#### EXPECTED AMORTIZATION SCHEDULE OUTSTANDING PRINCIPAL BALANCE PER TRANCHE(1),

---

| | | | |
|:---|:---|:---|:---|
| **Semi-Annual Payment Date**  | **Tranche**  | **Tranche**  | **Tranche**  |
| Issuance Date  |  |  |  |

---

(1) Totals may not add due to rounding.

On each payment date, the indenture trustee will make principal payments to the extent the principal balance of such tranche of the Bonds exceeds the amount indicated for that payment date in the table above and to the extent of funds available in the collection account after payment of certain of our fees and expenses and after payment of interest.

#### Distribution Following Acceleration
Upon an acceleration of the maturity of the Bonds, the total outstanding principal balance of and interest accrued on the Bonds will be payable, without regard to tranche. Although principal will be due and payable upon acceleration, the nature of our business will result in principal being paid as funds become available. Please read "Risk Factors—Risks Associated with the Unusual Nature of the Storm Recovery Property—Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the Bonds before maturity might result in your investment being repaid either earlier or later than expected" and "Risk Factors—You might experience material payment delays as a result of limited sources of payment for the Bonds and limited credit enhancement" in this prospectus.

#### No Optional Redemption
We may not voluntarily redeem any tranche of the Bonds.

#### Payments on the Bonds
The indenture trustee will pay on each payment date to the holders of each tranche of the Bonds, to the extent of available funds in the collection account, all payments of principal and interest then due. The indenture trustee will make each payment other than the final payment with respect to any Bonds to the holders of record of the Bonds of the applicable tranche designation on the record date for that payment date. The indenture trustee will make the final payment for each tranche of the Bonds, however, only upon presentation and surrender of the Bonds of that tranche at the office or agency of the indenture trustee specified in the notice given by the indenture trustee of the final payment. The indenture trustee will send notice of the final payment to the bondholders no later than five days prior to the final payment date, specifying the date set for the final payment and the amount of the payment.

The failure to pay accrued interest on any payment date (even if the failure is caused by a shortfall in storm recovery charges received) will result in an event of default for the Bonds unless such failure is cured within five business days. Any interest not paid when due (plus interest on the defaulted interest at the applicable interest rate to the extent lawful) will be payable to the bondholders on a special record date. The special record date will be at least 15 business days prior to the date on which the indenture trustee is to make such special payment (a "**special payment date**"). We will fix any special record date and special payment date. At least 10 days before any special record date, the indenture trustee will send to each affected bondholder a notice that states the special record date, the special payment date and the amount of defaulted interest (plus interest on the defaulted interest) to be paid. Please read "—Events of Default; Rights Upon Event of Default" in this prospectus.

The entire unpaid principal amount of the Bonds will be due and payable (i) on the final maturity date for each tranche or (ii) upon a declaration of acceleration by the indenture trustee or the holders of a majority in principal amount of the Bonds if an event of default under the indenture and the series supplement (other than an event of default arising from any act or failure to act by the State of North Carolina or any

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of its agencies (including the NCUC), that violates the state pledge or is not in accordance with the state pledge) occurs and is continuing.

However, the nature of our business will result in payment of principal upon an acceleration of the Bonds being made as funds become available. Please read "Risk Factors—You might experience material payment delay as a result of limited sources of payment for the Bonds and limited credit enhancement" and "Risk Factors—Risk Associated with the Unusual Nature of the Storm Recovery Property—Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the Bonds before maturity might result in your investment being repaid either earlier or later than expected" in this prospectus.

At the time, if any, we issue the bonds in the form of definitive Bonds and not to The Depository Trust Company, or "**DTC**", or its nominee, the indenture trustee will make payments with respect to that tranche on a payment date or a special payment date by check sent to each holder of a definitive Bond of the tranche of record on the applicable record date at its address appearing on the register maintained with respect to the Bonds. Upon written application by a holder of any tranche of the Bonds in physical form to the indenture trustee not later than the applicable record date, the indenture trustee will make payments by wire transfer to an account maintained by the payee.

If any special payment date or other date specified for any payments to bondholders is not a business day, the indenture trustee will make payments scheduled to be made on that special payment date or other date on the next business day, and no interest will accrue upon the payment during the intervening period.

#### Principal Payments on the Bonds
After paying fees, expenses and interest as described above, the indenture trustee will pay the principal due on each payment date to the holders of the Bonds. The indenture trustee will not pay principal on a payment date if making the payment would reduce the principal balance of the Bonds to an amount lower than the balance specified in the expected sinking fund schedule for the Bonds on that payment date, except in the case of an acceleration of the Bonds following an event of default.

#### Registration and Transfer of the Bonds
All Bonds will be represented by one or more Bonds registered in the name of Cede & Co., as nominee of DTC. There will be no service charge for any registration or transfer of the Bonds, but the indenture trustee may require the owner to pay a sum sufficient to cover any tax or other governmental charge.

We will issue each tranche of the Bonds in the minimum initial denominations of $2,000 and in integral multiples of $1,000 above that amount, except that one bond may be in a smaller denomination.

The indenture trustee will make payments of interest and principal on each payment date to the bondholders in whose names the Bonds were registered on the record date.

#### The Bonds Will Be Issued in Book-Entry Form
The Bonds will be available to investors only in the form of book-entry bonds. We will initially register any book-entry bonds in the name of Cede & Co., the nominee of DTC. Bondholders may also hold Bonds through Clearstream Banking, société anonyme, or "**Clearstream**", or Euroclear Bank S.A./N.V., as operator of the Euroclear system, or "**Euroclear**", in Europe or in any other manner described in the prospectus. You may hold your Bonds directly with one of these systems if you are a participant in the system or indirectly through organizations that are participants.

 *The Role of DTC, Clearstream and Euroclear* 

Cede & Co., as nominee for DTC, will hold the global bond or global bonds representing the Bonds. Clearstream and Euroclear will hold omnibus positions on behalf of the Clearstream customers and Euroclear participants, respectively, through customers' securities accounts in Clearstream's and Euroclear's names on the books of their respective depositaries. These depositaries will, in turn, hold these positions in customers' securities accounts in the depositaries' names on the books of DTC.

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 *The Function of DTC* 

DTC, the world's largest securities depository, is a limited-purpose trust company organized under the New York Banking Law, a banking organization within the meaning of the New York Banking Law, a member of the Federal Reserve System, a clearing corporation within the meaning of the New York Uniform Commercial Code, and a clearing agency registered pursuant to the provisions of Section 17A of the Exchange Act. DTC holds and provides asset servicing for U.S. and non-U.S. equity issues, corporate and municipal debt issues, and money market instruments that DTC's participants ("**direct participants**") deposit with DTC. DTC also facilitates the post-trade settlement among direct participants of sales and other securities transactions in deposited securities, through electronic computerized book-entry transfers and pledges between direct participants' accounts, thereby eliminating the need for physical movement of securities certificates. Direct participants include both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, clearing corporations, and certain other organizations. DTC is a wholly-owned subsidiary of The Depository Trust & Clearing Corporation ("**DTCC**"). DTCC is the holding company for DTC, National Securities Clearing Corporation and Fixed Income Clearing Corporation, all of which are registered clearing agencies. The users of its regulated subsidiaries own DTCC. Access to the DTC system is also available to others such as both U.S. and non-U.S. securities brokers and dealers, banks, trust companies, and clearing corporations that clear through or maintain a custodial relationship with a direct participant, either directly or indirectly ("**indirect participants**"). The DTC rules applicable to its participants are on file with the SEC. More information about DTC can be found at www.dtcc.com and www.dtc.org.

 *The Function of Clearstream* 

Clearstream holds securities for its customers and facilitates the clearance and settlement of securities transactions between Clearstream customers through electronic book-entry changes in accounts of Clearstream customers, thereby eliminating the need for physical movement of securities. Transactions may be settled by Clearstream in any of various currencies, including United States dollars. Clearstream provides to its customers, among other things, services for safekeeping, administration, clearance and settlement of internationally traded securities and securities lending and borrowing. Clearstream also deals with domestic securities markets in various countries through established depositary and custodial relationships. Clearstream is registered as a bank in Luxembourg and therefore is subject to regulation by the Luxembourg *Commission de Surveillance du Secteur Financier*, which supervises Luxembourg banks. Clearstream's customers are world-wide financial institutions including underwriters, securities brokers and dealers, banks, trust companies and clearing corporations, among others, and may include the underwriters of the Bonds. Clearstream's U.S. customers are limited to securities brokers and dealers and banks. Clearstream has customers located in various countries. Indirect access to Clearstream is also available to other institutions that clear through or maintain a custodial relationship with an account holder of Clearstream. Clearstream has established an electronic bridge with Euroclear to facilitate settlement of trades between Clearstream and Euroclear.

 *The Function of Euroclear* 

Euroclear holds securities and book-entry interests in securities for Euroclear participants and facilitates the clearance and settlement of securities transactions between Euroclear participants, and between Euroclear participants and participants of certain other securities intermediaries through simultaneous electronic book-entry delivery against payment, thereby eliminating the need for physical movement of securities and any risk from lack of simultaneous transfers of securities and cash. Such transactions may be settled in any of various currencies, including United States dollars. The Euroclear System includes various other services, including, among other things, safekeeping, administration, clearance and settlement, securities lending and borrowing and interfaces with domestic markets in several countries generally similar to the arrangements for cross-market transfers with DTC described below. The Euroclear System is operated by Euroclear Bank S.A./N.V. Euroclear participants include central banks and other banks, securities brokers and dealers and other professional financial intermediaries and may include the underwriters of the Bonds. Indirect access to the Euroclear System is also available to other firms that clear through or maintain a custodial relationship with a Euroclear participant, either directly or indirectly.

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 *Terms and Conditions of Euroclear* 

Securities clearance accounts and cash accounts with Euroclear are governed by the Terms and Conditions Governing Use of Euroclear and the related Operating Procedures of the Euroclear System, and applicable Belgian law (collectively, the "**Euroclear terms and conditions**"). These Euroclear terms and conditions govern transfers of securities and cash within the Euroclear System, withdrawals of securities and cash from the Euroclear System and receipts of payments with respect to securities in the Euroclear System. All securities in Euroclear are held on a fungible basis without attribution of specific securities to specific securities clearance accounts. Euroclear acts under the Euroclear terms and conditions only on behalf of Euroclear participants and has no record of or relationship with persons or entities holding through Euroclear participants.

 *The Rules for Transfers Among DTC, Clearstream or Euroclear Participants* 

Transfers between DTC participants will occur in accordance with DTC rules. Transfers between Clearstream customers or Euroclear participants will occur in the ordinary way in accordance with their applicable rules and operating procedures and will be settled using procedures applicable to conventional securities held in registered form.

Cross-market transfers between persons or entities holding directly or indirectly through DTC, on the one hand, and directly or indirectly through Clearstream customers or Euroclear participants, on the other, will be effected through DTC in accordance with DTC rules on behalf of the relevant European international clearing system by its depositary; however, those cross-market transactions will require delivery of instructions to the relevant European international clearing system by the counterparty in that system in accordance with its rules and procedures and within its established deadlines, which will be based on European time. The relevant European international clearing system will, if the transaction meets its settlement requirements, deliver instructions to its depositary to take action to effect final settlement on its behalf by delivering or receiving Bonds in DTC and making or receiving payment in accordance with normal procedures for same-day funds settlement applicable to DTC. Clearstream customers and Euroclear participants may not deliver instructions directly to Clearstream's and Euroclear's depositaries.

Because of time-zone differences, credits of securities in Clearstream or Euroclear as a result of a transaction with a participant will be made during the subsequent securities settlement processing, dated the business day following the DTC settlement date, and those credits or any transactions in those securities settled during that processing will be reported to the relevant Clearstream customer or Euroclear participant on that business day. Cash received in Clearstream or Euroclear as a result of sales of securities by or through a Clearstream customer or a Euroclear participant to a DTC participant will be received with value on the DTC settlement date but will be available in the relevant Clearstream or Euroclear cash account only as of the business day following settlement in DTC.

 *DTC's Nominee Will Be the Holder of the Bonds* 

Bondholders that are not participants or indirect participants but desire to purchase, sell or otherwise transfer ownership of, or other interest in, Bonds may do so only through participants and indirect participants. In addition, bondholders will receive all payments of principal of and interest on the Bonds from the indenture trustee through the participants, who in turn will receive them from DTC. Under a book-entry format, bondholders may experience some delay in their receipt of payments because payments will be forwarded by the indenture trustee to Cede & Co., as nominee for DTC. DTC will forward those payments to its participants, who thereafter will forward them to indirect participants or bondholders. It is anticipated that the only bondholder will be Cede & Co., as nominee of DTC. The indenture trustee will not recognize beneficial owners of interest in Bonds held by DTC or its nominee as bondholders, as that term is used in the indenture, and such beneficial owners will be permitted to exercise the rights of bondholders only indirectly through the participants, who in turn will exercise the rights of bondholders through DTC.

Under the rules, regulations and procedures creating and affecting DTC and its operations, DTC is required to make book-entry transfers of book-entry certificates among participants on whose behalf it acts with respect to the Bonds and is required to receive and transmit payments of principal of and interest on the Bonds. Participants and indirect participants with whom bondholders have accounts with respect to the

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bonds similarly are required to make book-entry transfers and receive and transmit those payments on behalf of their respective bondholders. Accordingly, although bondholders will not possess Bonds, bondholders will receive payments and will be able to transfer their interests.

Because DTC can act only on behalf of participants, who in turn act on behalf of indirect participants and certain banks, the ability of a bondholder to pledge Bonds to persons or entities that do not participate in the DTC system, or otherwise take actions in respect of those Bonds, may be limited due to the lack of a physical certificate for those Bonds.

DTC has advised us that it will take any action permitted to be taken by a bondholder under the indenture only at the direction of one or more participants to whose account with DTC the Bonds are credited. Additionally, DTC has advised us that it will take those actions with respect to specified percentages of the collateral amount only at the direction of and on behalf of participants whose holdings include interests that satisfy those specified percentages. DTC may take conflicting actions with respect to other interests to the extent that those actions are taken on behalf of participants whose holdings include those interests.

Except as required by law, none of any underwriter, the servicer, DEC, the indenture trustee, DEC NC Storm Funding II or any other party will have any liability for any aspect of the records relating to or payments made on account of beneficial interests in the certificates held by Cede & Co., as nominee for DTC, or for maintaining, supervising or reviewing any records relating to such beneficial interests.

 *How Storm Recovery Bond Payments Will Be Credited by Clearstream and Euroclear* 

Payments with respect to Bonds held through Clearstream or Euroclear will be credited to the cash accounts of Clearstream customers or Euroclear participants in accordance with the applicable system's rules and operating procedures, to the extent received by its depositary. Those payments will be subject to tax reporting in accordance with relevant United States tax laws and regulations. Please read "Material U.S. Federal Income Tax Consequences" in this prospectus. Clearstream or the Euroclear Operator, as the case may be, will take any other action permitted to be taken by a bondholder under the indenture on behalf of a Clearstream customer or Euroclear participant only in accordance with its applicable rules and operating procedures and subject to its depositary's ability to effect those actions on its behalf through DTC.

Although DTC, Clearstream and Euroclear have agreed to the foregoing procedures in order to facilitate transfers of the Bonds among participants of DTC, Clearstream and Euroclear, they are under no obligation to perform or continue to perform those procedures, and those procedures may be discontinued at any time.

#### Definitive Bonds
The Bonds will be issued in registered, certificated form to bondholders, or their nominees, rather than to DTC, or its nominee, only under the circumstances provided in the indenture, which will include: (i) DEC NC Storm Funding II advising the indenture trustee in writing that DTC is no longer willing or able to properly discharge its responsibilities as nominee and depositary with respect to the book-entry bonds of that series and that we are unable to locate a qualified successor; (ii) our electing to terminate the book-entry system through DTC, with written notice to the indenture trustee; or (iii) after the occurrence of an event of default under the indenture, holders of Bonds aggregating a majority of the aggregate outstanding principal amount of the Bonds maintained as book-entry bonds advising us, the indenture trustee and DTC in writing that the continuation of a book-entry system through DTC (or a successor) is no longer in the best interests of those bondholders. Upon surrender by DTC of the definitive securities representing the Bonds and instructions for registration, the indenture trustee will issue the Bonds in the form of definitive Bonds, and thereafter the indenture trustee will recognize the registered holders of the definitive Bonds as bondholders under the indenture or series supplement. Upon issuance of definitive Bonds, the Bonds evidenced by such definitive Bonds will be transferable directly (and not exclusively on a book-entry basis) and registered holders will deal directly with the indenture trustee with respect to transfers, notices and payments.

The indenture trustee will make payment of principal of and interest on the Bonds directly to bondholders in accordance with the procedures set forth herein and in the indenture or series supplement.

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The indenture trustee will make interest payments and principal payments to bondholders in whose names the definitive Bonds were registered at the close of business on the related record date. The indenture trustee will make payments by wire transfer to an account maintained by the bondholder in accordance with payment instructions delivered to the indenture trustee by such bondholders. The indenture trustee will make the final payment on any Bond (whether definitive Bonds or notes registered in the name of Cede & Co.), however, only upon presentation and surrender of the bond on the final payment date at the office or agency that is specified in the notice of final payment to bondholders. The indenture trustee will provide the notice to registered bondholders not later than the fifth day prior to the final payment date.

Definitive Bonds will be transferable and exchangeable at the offices of the transfer agent and registrar, which initially will be the indenture trustee. There will be no service charge for any registration of transfer or exchange, but the transfer agent and registrar may require payment of a sum sufficient to cover any tax or other governmental charge imposed in connection therewith.

#### Conditions of Issuance of Additional Storm Recovery Bonds and Acquisition of Additional Storm Recovery Property
DEC has covenanted under the sale agreement that the execution and delivery of a joinder or an amendment to the intercreditor agreements and satisfaction of the rating agency condition are conditions precedent to the sale of property by DEC consisting of nonbypassable charges payable by customers comparable to the storm recovery property sold by DEC pursuant to the sale agreement. Please read "Security for the Storm Recovery Bonds—How Funds in the Collection Account will be Allocated", "Intercreditor Agreements" and "The Sale Agreement—Covenants of the Seller" in this prospectus.

#### Allocations as Between Previous and Future Storm Recovery Bonds
The financing order requires storm recovery charges to be shown as a separate line item on the periodic bills sent to customers. Although each additional series of storm recovery bonds will have its own storm recovery property reflecting the right to impose, bill, charge, collect and receive a separate storm recovery charge, storm recovery charges relating to the Bonds and storm recovery charges relating to any additional series of storm recovery bonds will be collected through single periodic bills to each customer. In the event a customer does not pay in full all amounts owed under any bill including storm recovery charges, the servicer is required to allocate any resulting shortfalls in storm recovery charges ratably based on the amounts of storm recovery charges owing in respect of each series of storm recovery bond, including the Bonds of any series and charges of DEC, in proportion to their percentage of the overall bill. Please read "The Servicing Agreement—Remittances to Collection Account" in this prospectus.

#### Access of Bondholders
Upon written request of any bondholder or group of bondholders evidencing at least 10% of the aggregate outstanding principal amount of the Bonds, the indenture trustee will afford the bondholder or bondholders making such request a copy of a current list of bondholders for purposes of communicating with other bondholders with respect to their rights under the indenture or the series supplement; provided, that the indenture trustee gives prior written notice to us of such request.

The indenture or the series supplement does not provide for any annual or other meetings of bondholders.

#### Reports to Bondholders
On or prior to each payment date, special payment date or any other date specified in the indenture or the series supplement for payments with respect to any tranche of Bonds, the servicer will deliver to us and the indenture trustee, and the indenture trustee will make available on its website (currently located at https://pivot.usbank.com), a statement prepared by the servicer with respect to the payment to be made on the payment date, special payment date or other date, as the case may be, setting forth the following information:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the amount of the payment to bondholders allocable to (i) principal and (ii) interest;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the aggregate outstanding principal balance of the Bonds, before and after giving effect to payments allocated to principal reported immediately above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the difference, if any, between the amount specified immediately above and the principal amount scheduled to be outstanding on that date according to the related expected sinking fund schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any other transfers and payments to be made on such payment date or special payment date, including amounts paid to the indenture trustee and the servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the amounts on deposit in the capital subaccount and the excess funds subaccount, after giving effect to the foregoing payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the amount paid or to be paid to the indenture trustee since the preceding payment date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the amount paid or to be paid to the servicer since the preceding payment date; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the amount of any other transfers and payments made pursuant to the indenture or the series supplement since the preceding payment date.

The reports will be available to bondholders upon request to the indenture trustee or the servicer. Such reports will not constitute financial statements prepared in accordance with generally accepted accounting principles. The financial information provided to bondholders will not be examined and reported upon by an independent public accountant. In addition, an independent public accountant will not provide an opinion on the financial information.

Within the prescribed period of time for tax reporting purposes after the end of each calendar year during the term of the Bonds, the indenture trustee, so long as it is acting as paying agent and transfer agent and registrar for the Bonds, will, upon written request by us or any bondholder, send to persons or entities that at any time during the calendar year were bondholders and received any payment on the Bonds, a statement containing certain information for the purposes of the bondholder's preparation of United States federal and state income tax returns.

#### Website Disclosure
We will, to the extent permitted by and consistent with our and the sponsor's legal obligations under applicable securities laws, cause to be posted on a website associated with us or our affiliates, currently located at www.duke-energy.com, periodic and current reports containing, to the extent such information is reasonably available to us:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a statement of storm recovery charge remittances made to the indenture trustee, balances in the collection account (and each subaccount thereof) and the balance of outstanding storm recovery bonds, in each case, as of the most recent payment date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the semi-annual servicer's certificates and monthly servicer's certificates delivered for the Bonds pursuant to the servicing agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • changes in the long-term or short-term credit ratings of the servicer assigned by the rating agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • material legislative or regulatory developments directly relevant to the Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any reports and other information that are required to be filed with the SEC under the Exchange Act, including but not limited to periodic and current reports related to the Bonds consistent with the disclosure and reporting regime established in Regulation AB.

Information on DEC's website or that can be accessed through the website is not incorporated into and does not constitute a part of the registration statement of which this prospectus forms a part.

#### DEC NC Storm Funding II and the Indenture Trustee May Modify the Indenture and the Series Supplement
 *Modifications of the Indenture that Do Not Require Consent of Storm Recovery Bondholders* 

From time to time, and without the consent of the bondholders (but with prior notice to the indenture trustee and the rating agencies), we and the indenture trustee may enter into one or more agreements

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supplemental to the indenture and to the series supplement for various purposes described in the indenture and the series supplement, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to correct or amplify the description of any property, including the collateral subject to the lien of the indenture or the series supplement, or to better convey, assure and confirm to the indenture trustee the property subject to the lien of the indenture or the series supplement, or to add additional property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to add to the covenants for the benefit of the bondholders and the indenture trustee, or surrender any right or power conferred to us by the indenture or the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to convey, transfer, assign, mortgage or pledge any property to or with the indenture trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to cure any ambiguity or correct or supplement any provision in the indenture, in the series supplement or in any supplemental indenture that may be inconsistent with any other provision in the indenture, in the series supplement or in any supplemental indenture or to make any other provisions with respect to matters or questions arising under the indenture, under the series supplement or under any supplemental indenture, provided however, that (i) such action will not, as evidenced by an officer's certificate, adversely affect in any material respect the interests of the bondholders and (ii) the **rating agency condition** (as defined under "Glossary") shall have been satisfied with respect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to evidence and provide for the acceptance of the appointment under the indenture of a successor trustee with respect to the Bonds and to add or change any of the provisions of the indenture or the series supplement as shall be necessary to facilitate the administration of the trusts thereunder by more than one trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to evidence the succession of another person or entity to us in accordance with the terms of the indenture and in the series supplement and the assumption by any such successor of the covenants in the indenture, in the series supplement and in the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to modify, eliminate or add to the provisions of the indenture or the series supplement to such extent as shall be necessary to effect qualification under the Trust Indenture Act of 1939, as amended, or the **Trust Indenture Act**, and to add provisions expressly required by the Trust Indenture Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to qualify the Bonds for registration with a clearing agency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to satisfy any rating agency requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to set forth the terms of any series that has not therefore been authorized; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to authorize the appointment of any fiduciary for any tranche of the Bonds required or advisable with the listing of any tranche on any stock exchange and otherwise amend the indenture or the series supplement to incorporate changes requested or required by any government authority, stock exchange authority or fiduciary or any tranche in connection with such listing.

 *Modifications of the Indenture or the Series Supplement that Require the Approval of Storm Recovery Bondholders* 

We and the indenture trustee may, with the consent of bondholders holding a majority of the aggregate outstanding principal amount of the Bonds of each tranche to be affected (and with prior notice to the rating agencies), enter into one or more indentures supplemental to the indenture for the purpose of, among other things, adding any provisions to or changing in any manner or eliminating any of the provisions of the indenture or modifying in any manner the rights of bondholders. In determining whether a majority of holders have consented, Bonds owned by us, DEC or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any Bonds it actually knows to be so owned. No supplement, however, may, without the consent of each bondholder of each tranche affected thereby, take certain actions enumerated in the indenture or in the series supplement, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • change the date of payment of any installment of principal of or premium, if any, or interest on any bond of such tranche, or reduce in any manner the principal amount thereof, the interest rate thereon or the premium, if any, with respect thereto;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • change the provisions of the indenture or series supplement and any applicable supplemental indenture relating to the application of collections on, or the proceeds of the sale of, the collateral to payment of principal of or premium, if any, or interest on the Bonds or tranche, or change the place of payment where, or coin or currency in which, any bond or any interest thereon is payable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reduce the percentage of the aggregate amount of the outstanding Bonds, or of a tranche thereof, the consent of the bondholders of which is required for any supplemental indenture, or the consent of the bondholders of which is required for any waiver of compliance with those provisions of the indenture or the series supplement specified therein or of defaults specified therein and their consequences provided for in the indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reduce the percentage of the outstanding amount of the Bonds or tranche the holders of which are required to direct the indenture trustee to direct us to sell or liquidate the collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • modify any of the provisions of the indenture or series supplement in a manner so as to affect the amount of any payment of interest, principal or premium, if any, payable on any bond of such tranche on any payment date or change the expected sinking fund schedules or final maturity dates of any Bonds of such tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • decrease the required capital amount;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • permit the creation of any lien ranking prior to or on a parity with the lien of the indenture with respect to any of the collateral for the Bonds or tranche or, except as otherwise permitted or contemplated in the indenture or the series supplement, terminate the lien of the indenture on any property at any time subject thereto or deprive the holder of any bond of the security provided by the lien of the indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • cause any material adverse U.S. federal income tax consequence to the seller, us, our managers, the indenture trustee or the beneficial owners of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • modify the provisions of the indenture or the other basic documents with respect to amendments to the indenture and to certain of the other basic documents requiring consent of bondholders except to increase any percentage specified; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • impair the right to institute suit for enforcement of the provisions of the indenture or the series supplement regarding payment or application of funds.

Promptly following the execution of any supplement to the indenture, the indenture trustee will furnish or make available electronically either a copy of such supplement or written notice of the substance of the supplement to each bondholder of a bond to which such supplement relates, and a copy of such supplement to each rating agency. No supplemental indenture will be effective unless the conditions set forth in the indenture, relating to the NCUC's right to object (or to issue a statement that it might object) to such supplemental indenture, have been met. Please read "—Procedure for Obtaining Consent or Deemed Consent of the NCUC" below.

#### Notification of the Rating Agencies, the NCUC, the Indenture Trustee and the Storm Recovery Bondholders of Any Modification
If we, DEC, the administrator or the servicer or any other party to the applicable agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the sale agreement, the administration agreement, the servicing agreement or the intercreditor agreements; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • waives timely performance or observance by DEC, the administrator or the servicer under the sale agreement, the administration agreement, the servicing agreement or the intercreditor agreements, in each case in a way that would materially and adversely affect the interests of bondholders, we must first notify the rating agencies and satisfy the rating agency condition. Upon receiving notification regarding satisfaction of the rating agency condition, we must thereafter notify the indenture trustee, the NCUC and the bondholders in writing of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the rating agency condition has been satisfied

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with respect thereto (or, upon our written request, the indenture trustee shall so notify the bondholders on our behalf). The indenture trustee will consent to this proposed amendment, modification, supplement, waiver, termination or surrender only if the rating agency condition has been satisfied and only with the (i) written consent of the holders of a majority of the outstanding principal amount of the Bonds of the tranches materially and adversely affected thereby and (ii) if necessary under the sale agreement, servicing agreement, administration agreement or intercreditor agreements, satisfaction of the NCUC condition. In determining whether a majority of holders have consented, Bonds owned by us, DEC or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any Bonds it actually knows to be so owned.

#### Modifications to the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents
Except as set forth under "Notification of the Rating Agencies, the NCUC, the Indenture Trustee and the Storm Recovery Bondholders of Any Modification", the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreements may be amended, so long as such amendment does not change the true-up mechanism and the rating agency condition is satisfied in connection therewith and to the extent required by the sale agreement, the administration agreement, the servicing agreement or the intercreditor agreements, as the case may be, the NCUC condition has been satisfied, at any time and from time to time, without the consent of the bondholders, but with the acknowledgement of the indenture trustee upon receipt by the indenture trustee of an officer's certificate evidencing satisfaction of such rating agency condition and an opinion of counsel of external counsel evidencing that such amendment is in accordance with the provisions of such basic document and satisfaction of the NCUC condition. The servicing agreement does not provide any bondholder or any other person or entity with any legal or equitable right, remedy or claim in the storm recovery property, the servicing agreement or any covenants, conditions or provisions contained therein.

#### Enforcement of the Sale Agreement, the Administration Agreement, the Servicing Agreement and Other Basic Documents
The indenture provides that we will take all lawful actions to enforce our rights under the sale agreement, the administration agreement, the servicing agreement, the intercreditor agreements and the other basic documents. The indenture also provides that, promptly following a default, we will take all lawful actions the indenture trustee may request to compel or secure the performance and observance by each of DEC, each other party under the intercreditor agreements, the administrator and the servicer of their respective obligations to us under or in connection with the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreements. So long as no event of default occurs and is continuing, we may exercise any and all rights, remedies, powers and privileges lawfully available to us under or in connection with the sale agreement, the administration agreement, the servicing agreement and the intercreditor agreements provided that such action shall not adversely affect the interest of bondholders in any material respect. However, if we or the servicer propose to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for adjusting the storm recovery charges, we must notify the indenture trustee and the bondholders and, when required, the NCUC in writing of this proposal (or, upon our written request, the indenture trustee shall so notify the bondholders on our behalf). In addition, the indenture trustee may consent to this proposal only with the written consent of the holders of a majority of the principal amount of the outstanding Bonds of the tranches affected thereby and only if the rating agency condition is satisfied. In determining whether a majority of holders have consented, Bonds owned by us, DEC or any other of our affiliates shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any Bonds it actually knows to be so owned.

If an event of default occurs and is continuing, the indenture trustee may, and, at the written direction of the holders of a majority of the outstanding amount of all affected tranches of Bonds or the NCUC, shall exercise all of our rights, remedies, powers, privileges and claims against DEC, the administrator and the servicer, under or in connection with the sale agreement, the administration agreement, the servicing

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agreement and the intercreditor agreements, including the right or power to take any action to compel or secure performance or observance by the seller, the administrator or the servicer of each of their obligations to DEC NC Storm Funding II thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the sale agreement, the servicing agreement, the intercreditor agreements and the administration agreement and any right of ours to take this action shall be suspended.

#### Procedure for Obtaining Consent or Deemed Consent of the NCUC
The NCUC must consent or acquiesce prior to the implementation of any amendment, modification or supplement to the indenture or the other basic documents, or any waiver of a default under any basic document. Each of such basic documents sets forth procedures whereby we or DEC, as the case may be, may request such consent or acquiescence. The process, described below, for obtaining NCUC consent or acquiescence is referred to as the NCUC condition. The **NCUC condition** will be satisfied if, after receiving notice of any such amendment or modification or requested waiver, the NCUC consents in writing to such action or waiver, or does not object to such action or waiver within 60 days of any requested approval for an amendment, modification or waiver. Subject to the state pledge not to impair the value of the storm recovery property, the NCUC may object to any such amendment, modification or waiver in its sole discretion.

#### Covenants of DEC NC Storm Funding II
We may not consolidate with or merge into any other entity, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the entity formed by or surviving the consolidation or merger is organized under the laws of the United States or any state of the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the entity expressly assumes, by a supplemental indenture, the performance or observance of all of our agreements and covenants under the indenture and the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the entity expressly assumes all of our obligations and succeeds to all of our rights under the sale agreement, the servicing agreement and any other basic document to which we are a party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no default, event of default or servicer default under the indenture or the series supplement has occurred and is continuing immediately after the merger or consolidation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the rating agency condition will have been satisfied with respect to the merger or consolidation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the issuing entity has delivered to DEC, the indenture trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by us, in form and substance reasonably satisfactory to DEC and the indenture trustee, and which may be based on a ruling from the IRS) to the effect that the consolidation or merger will not result in a material adverse federal or state income tax consequence to us, DEC, the indenture trustee or the then existing bondholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the issuing entity has delivered to the indenture trustee an officer's certificate and an opinion of counsel of our external counsel, each stating that such consolidation or merger and such supplemental indenture comply with the indenture and the series supplement and that all conditions precedent in the indenture and the series supplement provided for relating to the transaction have been complied with.

We may not sell, convey, exchange, transfer or otherwise dispose of any of our properties or assets included in the collateral to any person or entity, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the person or entity acquiring the properties and assets:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • is a United States citizen or an entity organized under the laws of the United States or any State;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • expressly assumes, by a supplemental indenture, the performance or observance of all of our agreements and covenants under the indenture and series supplement;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • expressly agrees by the supplemental indenture that all right, title and interest so conveyed or transferred will be subject and subordinate to the rights of bondholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • unless otherwise specified in the supplemental indenture referred to above, expressly agrees to indemnify, defend and hold us and the indenture trustee harmless against and from any loss, liability or expense arising under or related to the indenture or the series supplement and the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • expressly agrees by means of the supplemental indenture that the person or entity (or if a group of persons or entities, then one specified person or entity) will make all filings with the SEC (and any other appropriate person or entity) required by the Exchange Act in connection with the storm recovery bond collateral and the Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • if such sale, conveyance, exchange, transfer or disposal relates to our rights and obligations under the sale agreement or the servicing agreement, such person or entity assumes all obligations and succeeds to all of our rights under the sale agreement and the servicing agreement, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no default, event of default or servicer default under the indenture or the series supplement has occurred and is continuing immediately after the transactions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the rating agency condition has been satisfied with respect to such transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we have delivered to DEC, the indenture trustee and the rating agencies an opinion or opinions of outside tax counsel (as selected by us, in form and substance reasonably satisfactory to DEC, and which may be based on a ruling from the IRS) to the effect that the disposition will not result in a material adverse U.S. federal or state income tax consequence to us, DEC, the indenture trustee or the then existing bondholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we have delivered to the indenture trustee an officer's certificate and an opinion of counsel of our external counsel, each stating that the conveyance or transfer complies with the indenture and all conditions precedent therein provided for relating to the transaction have been complied with.

We will not, among other things, for so long as any Bonds are outstanding:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • sell, transfer, exchange or otherwise dispose of any of our assets unless in accordance with the remedies provisions of the indenture or the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Bonds (other than amounts properly withheld from such payments under the Internal Revenue Code of 1986, as amended, or the "**Internal Revenue Code**", the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former bondholder by reason of the payment of the taxes levied or assessed upon any part of the collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • except as described above, terminate our existence, or dissolve or liquidate in whole or in part;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • permit the validity or effectiveness of the indenture or the other basic documents to be impaired;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • permit the lien of the indenture to be amended, hypothecated, subordinated, terminated or discharged or permit any person or entity to be released from any covenants or obligations with respect to the Bonds except as may be expressly permitted by the indenture or the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • permit any lien, charge, pledge, claim, security interest, mortgage or other encumbrance, other than the lien and security interest granted under the indenture, to be created on or extend to or otherwise arise upon or burden the collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • permit the lien granted under the indenture not to constitute a valid first priority perfected security interest in the collateral;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • elect to be classified as an association taxable as a corporation for U.S. federal income tax purposes, file any tax return or take any other action inconsistent with our treatment for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from our sole member;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • change our name, identity or structure or the location of its chief executive office unless, at least ten business days prior to the effective date of any such change, we deliver to the indenture trustee (with copies to each rating agency) such documents, instruments or agreements, executed by us, as are necessary to reflect such change and to continue the perfection of the security interest of the indenture or the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • except to the extent permitted by applicable law, voluntarily suspend or terminate our SEC filing obligations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • take any action that is subject to the rating agency condition without satisfying the rating agency condition; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • issue any debt obligations other than the storm recovery bonds permitted by the indenture.

The issuing entity may not engage in any business other than financing, purchasing, owning, administering, managing, and servicing the storm recovery property and other collateral and issuing the Bonds or additional storm recovery bonds pursuant to an additional financing order issued by the NCUC pursuant to the Financing Act.

The issuing entity will not issue, incur, assume, guarantee or otherwise become liable for any other indebtedness except for the storm recovery bonds. Also, we will not, except as contemplated by the Bonds and the basic documents, make any loan or advance or credit to, or guarantee, endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other person or entity. We will not, except for the acquisition of storm recovery property as contemplated by the Bonds and the basic documents, make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

The issuing entity will not, directly or indirectly, make payments to or distributions, dividends or redemptions to any holder of its equity interest in respect of that interest except in accordance with the indenture, the series supplement and other basic documents.

The issuing entity will cause the servicer to deliver to the indenture trustee the annual accountant's certificates, compliance certificates, reports regarding distributions and statements to bondholders required by the servicing agreement.

#### Events of Default; Rights Upon Event of Default
An **event of default** with respect to the Bonds is defined in the indenture as any one of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a default for five business days in the payment when due of any interest on any bond (whether such failure to pay interest is caused by a shortfall in storm recovery charges received or otherwise);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a default in the payment of the then unpaid principal with respect to any tranche on the final maturity date for that tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a default in the observance or performance of any of our covenants or agreements made in the indenture or the series supplement (other than defaults described above) and the continuation of any default for a period of 30 days after the earlier of (i) the date that written notice of the default is given to us by the indenture trustee or to us and the indenture trustee by the holders of at least 25% in principal amount of the Bonds then outstanding or (ii) the date that we had actual knowledge of the default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any representation or warranty made by us in the indenture, the series supplement or in any certificate or other writing delivered pursuant to the indenture or the series supplement or in connection with

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the indenture or series supplement having been incorrect in any material respect as of the time made, and such breach not having been cured within 30 days after the earlier of (i) the date that notice of the breach is given by registered or certified mail to us by the indenture trustee or to us and the indenture trustee by the holders of at least 25% in principal amount of the Bonds then outstanding or (ii) the date that we had actual knowledge of the default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • certain events of bankruptcy, insolvency, receivership or liquidation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a breach by the State of North Carolina or any of its agencies (including the NCUC), officers or employees that violates the pledge of the State of North Carolina or is not in accordance with the pledge of the State of North Carolina.

If an event of default (other than as specified in the last bullet point above) should occur and be continuing with respect to the Bonds, the indenture trustee or holders of a majority in principal amount of the Bonds then outstanding may declare the unpaid principal of the Bonds and all accrued and unpaid interest thereon to be immediately due and payable. However, the nature of our business will result in payment of principal upon an acceleration of the Bonds being made as funds become available. Please read "Risk Factors—Risk Associated with the Unusual Nature of the Storm Recovery Property—Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the Bonds before maturity might result in your investment being repaid either earlier or later than expected" and "Risk Factors—You might experience material payment delays as a result of limited sources of payment for the Bonds and limited credit enhancement". The holders of a majority in principal amount of the Bonds may rescind and annul that declaration and its consequences so long as we deposit with the indenture trustee any past due amounts of all storm recovery bonds and expenses of the indenture trustee and all events of default of all storm recovery bonds, other than the nonpayment caused by acceleration, have been cured. Additionally, the indenture trustee may exercise all of our rights, remedies, powers, privileges and claims against the seller or the servicer or the administrator under or in connection with the sale agreement, the servicing agreement and the administration agreement. If an event of default as specified in the last bullet above has occurred, the servicer will be obligated under the servicing agreement to institute (and the indenture trustee, for the benefit of the bondholders, will be entitled and empowered to institute) any suits, actions or proceedings at law, in equity or otherwise, to enforce the pledge of the State of North Carolina and to collect any monetary damages as a result of a breach thereof, and each of the seller, the servicer and the indenture trustee may prosecute any suit, action or proceeding to final judgment or decree. The servicer is obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses and is not required to advance its own funds in order to bring any suits, actions or proceedings and, for so long as the legal actions were pending, the servicer will be required, unless otherwise prohibited by applicable law or court or regulatory order in effect at that time, to bill, collect and post the storm recovery charges, perform adjustments and discharge its obligations under the servicing agreement. The indenture trustee will not be deemed to have knowledge of any event of default or a breach of representation or warranty unless a responsible officer of the indenture trustee has actual knowledge of the default or the indenture trustee has received written notice of the default in accordance with the indenture.

If an event of default (other than a breach by the State of North Carolina or any of its agencies of the pledge of the State of North Carolina as specified in the last bullet point above) shall have occurred and be continuing, the indenture trustee may, at the written direction of the holders of a majority in principal amount of the Bonds then outstanding, either sell the storm recovery property or elect to have us maintain possession of all or a portion of such storm recovery property and continue to apply storm recovery charge collections as if there had been no declaration of acceleration. There is likely to be a limited market, if any, for the storm recovery property following a foreclosure, in light of the event of default, the unique nature of the storm recovery property as an asset and other factors discussed in this prospectus. In addition, the indenture trustee is prohibited from selling the storm recovery property following an event of default, other than a default in the payment of any principal or a default for five business days or more in the payment of any interest on any bond, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the holders of all the outstanding Bonds consent to the sale;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the proceeds of the sale are sufficient to pay in full the principal of and the accrued interest on the outstanding Bonds; or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the indenture trustee determines that the proceeds of the collateral would not be sufficient on an ongoing basis to make all payments on the Bonds as those payments would have become due if the Bonds had not been declared due and payable, and the indenture trustee obtains the consent of the holders of at least two-thirds of the aggregate outstanding amount of the Bonds.

Subject to the provisions of the indenture and the series supplement relating to the duties of the indenture trustee, if an event of default occurs and is continuing, the indenture trustee will be under no obligation to exercise any of the rights or powers under the Bonds at the request or direction of any of the holders of Bonds if the indenture trustee believes in its discretion it will not be adequately indemnified against the costs, expenses and liabilities that might be incurred by it in complying with the request. Subject to the provisions for indemnification and certain limitations contained in the indenture or in the series supplement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the holders of a majority in principal amount of the outstanding Bonds of an affected tranche will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the indenture trustee; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • prior to the acceleration of the Bonds, the holders of a majority in principal amount of the Bonds then outstanding of an affected tranche may, in certain cases, waive any default with respect thereto, except a default in the payment of principal or interest or a default in respect of a covenant or provision of the indenture or the series supplement that cannot be modified without the consent of all of the holders of the outstanding Bonds of all tranches affected thereby.

No holder of any bond will have the right to institute any proceeding, to avail itself of any remedies provided in the Financing Act or of the right to foreclose on the collateral, or otherwise to enforce the lien and security interest on the collateral or to seek the appointment of a receiver or indenture trustee, or for any other remedy under the indenture or the series supplement, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the holder previously has given to the indenture trustee written notice of a continuing event of default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the holders of a majority in principal amount of the outstanding Bonds have made written request of the indenture trustee to institute the proceeding in its own name as indenture trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the holder or holders have offered the indenture trustee satisfactory indemnity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the indenture trustee has for 60 days failed to institute the proceeding; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no direction inconsistent with the written request has been given to the indenture trustee during the 60-day period by the holders of a majority in principal amount of the outstanding Bonds.

In addition, the indenture trustee and the servicer will covenant and each bondholder will be deemed to covenant that it will not, prior to the date that is one year and one day after the termination of the indenture or the series supplement, institute against us or against our managers or our member or members any bankruptcy, reorganization or other proceeding under any federal or state bankruptcy or similar law, subject to the right of a circuit court of the State of North Carolina to order sequestration and payment of revenues arising with respect to the storm recovery property.

Neither any manager nor the indenture trustee in its individual capacity, nor any holder of any ownership interest in us, nor any of their respective owners, beneficiaries, agents, officers, directors, employees, successors or assigns will, in the absence of an express agreement to the contrary, be personally liable for the payment of the principal of or interest on the Bonds or for our agreements contained in the indenture or the series supplement.

#### Actions by Bondholders
Subject to certain exceptions, the holders of a majority of the aggregate outstanding amount of the Bonds issued under the indenture or the series supplement (or, if less than all tranches are affected, the affected tranche or tranches) will have the right to direct the time, method and place of (i) conducting any proceeding for any remedy available to the indenture trustee and (ii) exercising any trust or power conferred on the indenture trustee under the indenture or under the series supplement; provided, that:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the direction is not in conflict with any rule of law or with the indenture or the series supplement and would not involve the indenture trustee in personal liability or expense;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • subject to any other conditions specified in the indenture or the series supplement, any direction to the indenture trustee to sell or liquidate the collateral shall be by holders of 100% of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • if the conditions specified in the indenture have been satisfied and the indenture trustee elects to retain the collateral in accordance with the indenture, then any direction to the indenture trustee by less than 100% of bondholders to sell or liquidate the collateral will be of no force and effect; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the indenture trustee may take any other action deemed proper by the indenture trustee that is not inconsistent with the direction.

If any circumstance under which the indenture trustee is required to seek instructions from the holders of the Bonds of any tranche with respect to any action or vote, the indenture trustee will take the action or vote for or against any proposal in proportion to the principal amount of the corresponding tranche, as applicable, of Bonds taking the corresponding position. Notwithstanding the foregoing, the indenture allows each bondholder to institute suit for the enforcement of payment of (i) the interest, if any, on its Bonds that remains unpaid as of the applicable due date and (ii) the unpaid principal, if any, of its Bonds on the final maturity date for such tranche.

#### Annual Report of Indenture Trustee
If required by the Trust Indenture Act, the indenture trustee will be required to send each year to all bondholders a brief report, commencing in March 31, . The report must state, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any change in the indenture trustee's eligibility and qualification to continue as the indenture trustee under the indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any amounts advanced by it under the indenture or the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any change in the amount, interest rate and maturity date of specific indebtedness owing by us to the indenture trustee in the indenture trustee's individual capacity;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any change in the property and funds physically held pursuant to the indenture or the series supplement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any action taken by it that materially affects the Bonds and that has not been previously reported.

#### Annual Compliance Statement
We will file annually, with the indenture trustee, the NCUC and the rating agencies, a written statement as to whether we have fulfilled our obligations under the indenture.

#### Satisfaction and Discharge of Indenture
The indenture will cease to be of further effect with respect to the Bonds and the indenture trustee, on our written demand and at its expense, will execute instruments acknowledging satisfaction and discharge of the indenture with respect to the Bonds, when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • either all Bonds that have already been authenticated or delivered, with certain exceptions set forth in the indenture, have been delivered to the indenture trustee for cancellation or either the scheduled final payment date for Bonds not delivered for cancellation has occurred or will occur within one year and we have irrevocably deposited or cause to be deposited in trust with the indenture trustee cash and/or U.S. government obligations that through the payments of principal and interest in accordance with their terms are in an amount sufficient to pay principal, interest and premiums, if any, on the Bonds and ongoing financing costs and all other sums payable by us with respect to the Bonds when scheduled to be paid and to discharge the entire indebtedness on such Bonds when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we have paid all other sums payable by us with respect to the Bonds under the indenture; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we have delivered to the indenture trustee an officer's certificate, an opinion of its external counsel and, if required by the Trust Indenture Act or the indenture trustee, a certificate from a firm of

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independent registered public accountants, each stating that there has been compliance with the conditions precedent in the indenture relating to the satisfaction and discharge of the indenture.

#### DEC NC Storm Funding II's Legal and Covenant Defeasance Options
We may, at any time, terminate all of our obligations under the indenture and the series supplement, referred to herein as the "**legal defeasance option**", or terminate our obligations to comply with some of the covenants in the indenture and the series supplement, including some of the covenants described under "—Covenants of DEC NC Storm Funding II", referred to herein as the "**covenant defeasance option**".

We may exercise the legal defeasance option of the Bonds notwithstanding our prior exercise of the covenant defeasance option. If we exercise the legal defeasance option, the Bonds will be entitled to payment only from the funds or other obligations set aside under the indenture or the series supplement for payment thereof as described below. The Bonds of any tranche will not be subject to payment through redemption or acceleration prior to the scheduled final payment date or redemption date, as applicable, for such tranche. If we exercise the covenant defeasance option, the maturity of the Bonds may not be accelerated because of an event of default relating to a default in the observance or performance of any of our covenants or agreements made in the indenture or in the series supplement.

The indenture provides that we may exercise our legal defeasance option or our covenant defeasance option of Bonds only if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we irrevocably deposit or cause to be irrevocably deposited in trust with the indenture trustee cash and/or U.S. government obligations that through the payments of principal and interest in accordance with their terms are in an amount sufficient without reinvestment, to pay principal, interest and premium, if any, on the Bonds and ongoing financing costs and any other sums payable under the indenture or the series supplement with respect to the Bonds when scheduled to be paid and to discharge the entire indebtedness on the Bonds when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we deliver to the indenture trustee a certificate from a nationally recognized firm of independent registered public accountants expressing its opinion that the payments of principal of and interest on the U.S. government obligations when due and without reinvestment plus any deposited cash will provide cash at times and in sufficient amounts to pay in respect of the Bonds:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • principal in accordance with the expected sinking fund schedule therefore;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • interest when due; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • ongoing financing costs and all other sums payable under the indenture or the series supplement with respect to the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • in the case of the legal defeasance option, 95 days after the deposit is made and during the 95-day period no default relating to events of our bankruptcy, insolvency, receivership or liquidation occurs and is continuing at the end of the period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no default has occurred and is continuing on the day of this deposit and after giving effect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • in the case of the legal defeasance option, we deliver to the indenture trustee an opinion of its external counsel stating that it has received from, or there has been published by, the IRS a ruling, or since the date of execution of the indenture and the series supplement, there has been a change in the applicable U.S. federal income tax law, and in either case confirming that the holders of the Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of such legal defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the legal defeasance had not occurred;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • in the case of the covenant defeasance option, we deliver to the indenture trustee an opinion of our external counsel to the effect that the holders of the Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of the exercise of the covenant defeasance option and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if the covenant defeasance had not occurred;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we deliver to the indenture trustee a certificate of one of our officers and an opinion of our counsel, each stating that all conditions precedent to the legal defeasance option or the covenant defeasance option, as applicable, have been complied with as required by the indenture or the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we deliver to the indenture trustee an opinion of our external counsel to the effect that: (i) in a case under the Bankruptcy Code in which DEC (or any of its affiliates, other than us) is the debtor, the court would hold that the deposited moneys or U.S. government obligations would not be in the bankruptcy estate of DEC (or any of its affiliates, other than us, that deposited the moneys or U.S. government obligations); and (ii) in the event DEC (or any of its affiliates, other than us, that deposited the moneys or U.S. government obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of DEC (or any of its affiliates, other than us, that deposited the moneys or U.S. government obligations) and us so as to order substantive consolidation under the Bankruptcy Code of our assets and liabilities with the assets and liabilities of DEC or such other affiliate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the rating agency condition has been satisfied with respect to the exercise of any legal defeasance option or covenant defeasance option.

#### No Recourse to Others
No recourse may be taken directly or indirectly, by the bondholders with respect to our obligations or the indenture trustee's obligations on the Bonds, under the indenture or any supplement thereto or any certificate or other writing delivered in connection therewith, against (i) DEC NC Storm Funding II, other than from the storm recovery bond collateral, (ii) any owner of a beneficial interest in DEC NC Storm Funding II (including DEC) or (iii) any shareholder, partner, owner, beneficiary, agent, officer, employee or agent of the indenture trustee, the managers or any owner of a beneficial interest in DEC NC Storm Funding II (including DEC) in its individual capacity, or of any successors or assigns or any of them in their respective individual or corporate capacities, except as any such person or entity may have expressly agreed in writing.

Notwithstanding any provision of the indenture or the series supplement to the contrary, bondholders shall look only to the storm recovery bond collateral with respect to any amounts due to the bondholders under the indenture and the Bonds, and, in the event such collateral is insufficient to pay in full the amounts owed on the Bonds, shall have no recourse against us in respect of such insufficiency. Each bondholder by accepting a bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of consideration for issuance of the Bonds.

#### Certain Regulatory Provisions
*No Credit Risk Retention Expected.* Section 941 of the Dodd-Frank Wall Street Reform and Consumer Protection Act added section 15G to the Exchange Act, generally requiring sponsors of asset-backed securities to retain not less than 5% of the credit risk of the assets collateralizing the asset-backed securities. The final common rule adopted by the SEC and other U.S. agencies on October 22, 2014 provides that this 5% risk retention requirement does not apply to qualifying electric utility sponsored ratepayer obligation charge bond transactions. We and DEC believe that the storm recovery bonds qualify for this exception, and as a result, the storm recovery bonds will not be subject to the general 5% risk retention requirement of section 15G of the Exchange Act.

We and DEC believe that the Bonds will also not be subject to the 5% risk retention requirement imposed by the European Securitisation Regulation or the UK Securitisation Regulation. For the purposes of the EU Securitisation Rules and the UK Securitisation Rules, we and DEC believe the issue of the Bonds does not fall within the definition of a "securitisation" as the credit risk associated with exposure is not tranched. We and DEC believe, therefore, that neither the EU Securitisation Rules nor the UK Securitisation Rules apply to the issue of the Bonds.

If a European regulator or a UK regulator should decide that the issue of the Bonds is a "securitisation" for the purposes of the EU Securitisation Rules or the UK Securitisation Rules then failure to comply with one or more of the requirements set out in such rules might result in the imposition of a penal capital charge

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with respect to the investment made in the securitization by a credit institution and investment firm regulated in a Member State of the European Economic Area or, as the case may be, the United Kingdom and in each case its consolidated group affiliates.

None of DEC, us, any underwriter or any other party to the transaction of which this offering is a part intends to retain a material net economic interest in the transaction of which this offering is a part for the purposes of the risk retention requirements discussed above or take any other action that may be required by investors for the purposes of their compliance with these requirements.

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#### THE INDENTURE TRUSTEE
U.S. Bank Trust Company, National Association, a national banking association ("**U.S. Bank Trust Co.**"), will act as the "**indenture trustee**", and will act as the paying agent and registrar for the storm recovery bonds. U.S. Bank National Association ("**U.S. Bank N.A.**") made a strategic decision to reposition its corporate trust business by transferring substantially all of its corporate trust business to its affiliate, U.S. Bank Trust Co., a non-depository trust company (U.S. Bank N.A. and U.S. Bank Trust Co. are collectively referred to herein as "**U.S. Bank**"). Upon U.S. Bank Trust Co.'s succession to the business of U.S. Bank N.A., it became a wholly owned subsidiary of U.S. Bank N.A. The indenture trustee will maintain the accounts of the issuing entity in the name of the indenture trustee at U.S. Bank N.A.

U.S. Bancorp, with total assets exceeding $676 billion as of March 31, 2025, is the parent company of U.S. Bank N.A., the fifth largest commercial bank in the United States. As of March 31, 2025, U.S. Bancorp operated over 2,100 branch offices in 26 states. A network of specialized U.S. Bancorp offices across the nation provides a comprehensive line of banking, brokerage, insurance, investment, mortgage, trust and payment services products to consumers, businesses, and institutions.

U.S. Bank has one of the largest corporate trust businesses in the country with office locations in 46 domestic and 3 international cities. The indenture will be administered from U.S. Bank's corporate trust office located at 190 South LaSalle Street, 7th Floor, Chicago, Illinois 60603.

U.S. Bank has provided corporate trust services since 1924. As of March 31, 2025, U.S. Bank was acting as trustee with respect to over 154,000 issuances of securities with an aggregate outstanding principal balance of over $6.3 trillion. This portfolio includes corporate and municipal bonds, mortgage-backed and asset-backed securities and collateralized debt obligations.

The indenture trustee shall make each monthly statement available to the bondholders via the indenture trustee's internet website at https://pivot.usbank.com. Bondholders with questions may direct them to the indenture trustee's bondholder services group at (800) 934-6802.

U.S. Bank serves or has served as indenture trustee, paying agent and registrar on several issues of utility rate-payer backed securities.

U.S. Bank N.A. and other large financial institutions have been sued in their capacity as trustee or successor trustee for certain residential mortgage-backed securities ("RMBS") trusts. The complaints, primarily filed by investors or investor groups against U.S. Bank N.A. and similar institutions, allege the trustees caused losses to investors as a result of alleged failures by the sponsors, mortgage loan sellers and servicers to comply with the governing agreements for these RMBS trusts. Plaintiffs generally assert causes of action based upon the trustees' purported failures to enforce repurchase obligations of mortgage loan sellers for alleged breaches of representations and warranties, notify securityholders of purported events of default allegedly caused by breaches of servicing standards by mortgage loan servicers and abide by a heightened standard of care following alleged events of default.

U.S. Bank N.A. denies liability and believes that it has performed its obligations under the RMBS trusts in good faith, that its actions were not the cause of losses to investors, that it has meritorious defenses, and it has contested and intends to continue contesting the plaintiffs' claims vigorously. However, U.S. Bank N.A. cannot assure you as to the outcome of any of the litigation, or the possible impact of these litigations on the trustee or the RMBS trusts.

On March 9, 2018, a law firm purporting to represent fifteen Delaware statutory trusts (the "DST") that issued securities backed by student loans (the "Student Loans") filed a lawsuit in the Delaware Court of Chancery against U.S. Bank N.A. in its capacities as indenture trustee and successor special servicer, and three other institutions in their respective transaction capacities, with respect to the DSTs and the Student Loans. This lawsuit is captioned The National Collegiate Student Loan Master Trust I, et al. v. U.S. Bank National Association, et al., C.A. No. 2018-0167-JRS (Del. Ch.) (the "NCMSLT Action"). The complaint, as amended on June 15, 2018, alleged that the DSTs have been harmed as a result of purported misconduct or omissions by the defendants concerning administration of the trusts and special servicing of the Student Loans. Since the filing of the NCMSLT Action, certain Student Loan borrowers have made

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assertions against U.S. Bank N.A. concerning special servicing that appear to be based on certain allegations made on behalf of the DSTs in the NCMSLT Action.

U.S. Bank N.A. has filed a motion seeking dismissal of the operative complaint in its entirety with prejudice pursuant to Chancery Court Rules 12(b)(1) and 12(b)(6) or, in the alternative, a stay of the case while other prior filed disputes involving the DSTs and the Student Loans are litigated. On November 7, 2018, the Court ruled that the case should be stayed in its entirety pending resolution of the first-filed cases. On January 21, 2020, the Court entered an order consolidating for pretrial purposes the NCMSLT Action and three other lawsuits pending in the Delaware Court of Chancery concerning the DSTs and the Student Loans, which remains pending.

U.S. Bank N.A. denies liability in the NCMSLT Action and believes it has performed its obligations as indenture trustee and special servicer in good faith and in compliance in all material respects with the terms of the agreements governing the DSTs and that it has meritorious defenses. It has contested and intends to continue contesting the plaintiffs' claims vigorously.

The indenture trustee (or any other eligible institution in any capacity under the indenture) may resign at any time upon 30 days' prior written notice to the issuing entity. The holders of a majority of aggregate outstanding principal amount of the Bonds may remove the indenture trustee (or any other eligible institution in any capacity under the indenture) upon 31 days' prior written notice to the indenture trustee (or such other eligible institution) and may appoint a successor indenture trustee (or successor eligible institution in the applicable capacity). The issuing entity will remove the indenture trustee if the indenture trustee ceases to be eligible to continue in this capacity under the indenture, the indenture trustee becomes a debtor in a bankruptcy proceeding or is adjudicated insolvent, a receiver or other public officer takes charge of the indenture trustee or its property, the indenture trustee becomes incapable of acting or the indenture trustee fails to provide to the issuing entity any information pertaining to the indenture trustee it reasonably requests which is necessary for the issuing entity to satisfy its reporting obligations under the federal securities laws. The issuing entity will remove any person (other than the indenture trustee) acting in any capacity under the indenture that fails to constitute an eligible institution with 30 day's prior notice. If the indenture trustee resigns or is removed or a vacancy exists in the office of indenture trustee for any reason, the issuing entity will be obligated promptly to appoint a successor indenture trustee eligible under the indenture and notice of such appointment is required to be promptly given to each rating agency by the successor indenture trustee. If any person (other than the indenture trustee) acting in any capacity under the indenture as an eligible institution is removed or fails to constitute an eligible institution or if a vacancy exists in any such capacity for any reason, the issuing entity will promptly appoint a successor to such capacity that constitutes an eligible institution. No resignation or removal of the indenture trustee (or any other person acting as an eligible institution) will become effective until acceptance of the appointment by a successor indenture trustee (or a successor eligible institution). The issuing entity is responsible for payment of the expenses associated with any such removal or resignation.

The indenture trustee will at all times satisfy the requirements of the Trust Indenture Act and Section 26(a)(1) of the Investment Company Act of 1940 and have a combined capital and surplus of at least $50 million and a long-term issuer rating from Moody's in one of its generic rating categories that signifies investment grade and a long-term issuer rating from S&P of at least "A." If the indenture trustee consolidates with, merges or converts into, or transfers all or substantially all of its corporate trust business or assets to, another entity, the resulting, surviving or transferee entity will without any further action be the successor indenture trustee.

The indenture trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers under the indenture; provided that its conduct does not constitute willful misconduct, negligence or bad faith. The issuing entity has agreed to indemnify and hold harmless the indenture trustee and its officers, directors, employees and agents against any and all cost, damage, loss, liability, tax or expense (including reasonable attorney's fees and expenses including the costs of defending any claim or bringing any claim to enforce the issuing entity's indemnification obligations under the indenture) incurred by it in connection with the administration and enforcement of the indenture, the series supplement and the other basic documents and the performance of its duties under the indenture and its obligations under or pursuant to the indenture, the series supplement and the other basic documents, provided that the issuing entity is not required to pay any expense or indemnify against any loss, liability or

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expense incurred by the indenture trustee through the indenture trustee's own willful misconduct, negligence or bad faith. Please read "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will Be Allocated" in this prospectus.

The issuing entity, DEC and their respective affiliates may from time to time enter into normal banking and trustee relationships with the indenture trustee or its affiliates. Affiliates of the indenture trustee act as lender for, and provide other banking, investment banking and other financial services to, Duke Energy Corporation, DEC and their respective affiliates.

No relationships currently exist or existed during the past two years between DEC, the issuing entity and each of their respective affiliates, on the one hand, and the indenture trustee and its affiliates, on the other hand, that would be outside the ordinary course of business or on terms other than would be obtained in an arm's length transaction with an unrelated third party.

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#### SECURITY FOR THE STORM RECOVERY BONDS

#### General
The Bonds issued under the indenture will be non-recourse obligations and will be payable solely from and secured solely by a pledge of and lien on the storm recovery property relating to the Bonds and other collateral as provided in the indenture and the series supplement. Storm recovery property includes the right to impose, bill, charge, collect and receive storm recovery charges. These charges will be paid by all existing and future North Carolina customers receiving transmission or distribution service, or both, from DEC or its successors or assignees under rate schedules approved by the NCUC or under special contracts. Storm recovery charges are payable by customers even if the customers elect to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in North Carolina. Storm recovery property includes the right to implement the true-up mechanism, at least semi-annually. See "The Storm Recovery Property and the Financing Act" in this prospectus.

#### Pledge of Collateral
To secure the payment of principal of and interest on the Bonds, we will grant to the indenture trustee a security interest in all of our right, title and interest (whether owned on the issuance date or thereafter acquired or arising) in and to the following property:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the storm recovery property created under and pursuant to the financing order and the Financing Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive storm recovery charges, the right to obtain true-up adjustments to those charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the financing order);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all storm recovery charges related to the foregoing storm recovery property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the foregoing storm recovery property and the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicing agreement, the administration agreement, the intercreditor agreements and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing storm recovery property and the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the collection account, relating to the Bonds and established under the indenture and the series supplement, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all rights to compel the servicer to file for and obtain true-up adjustments to the storm recovery charges in accordance with the Financing Act and the financing order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute storm recovery property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all payments on or under and all proceeds in respect of any or all of the foregoing. The collateral does not include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • cash that has been released pursuant to the terms of the indenture and the series supplement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • amounts deposited with us on the issuance date, for payment of costs of issuance with respect to the Bonds (together with any interest earnings thereon); or

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • proceeds from the sale of the Bonds required to pay the purchase price of the foregoing storm recovery property paid pursuant to the sale agreement and the costs of the issuance of the Bonds.

We refer to the foregoing assets in which we, as assignee of the seller, will grant the indenture trustee a security interest as the "**storm recovery bond collateral**". Please read "—How Funds in the Collection Account Will Be Allocated" in this prospectus.

#### Security Interest in the Collateral
Section 62-172(e). of the Financing Act provides that a valid and enforceable security interest in storm recovery property will attach and be perfected only upon the later of: the issuance of a financing order, the execution and delivery of a security agreement by the debtor in connection with issuance of a series of bonds, the debtor has rights in such bonds or the power to transfer rights in such bonds or the receipt of value for such bonds. Upon perfection by filing notice with the North Carolina Secretary of State, the lien and security interest will be continuously perfected. Section 62-172(e)(1). of the Financing Act further provides that such security interest in the storm recovery property and all proceeds of the storm recovery property, whether or not billed, accrued or collected, and whether or not deposited into the collection account and however evidenced, will have priority in the order of filing and take precedence over any subsequent judicial or other lien creditor. No continuation statements are necessary to maintain such perfection.

The relative priority of the lien and security interest perfected under Section 62-172(e). of the Financing Act is not impaired by later modification of the financing order or the commingling of revenues arising with respect to any storm recovery property with other funds (subject to the tracing requirements of federal bankruptcy law).

The financing order creates a valid and enforceable lien and security interest in the storm recovery property and the indenture and the series supplement state that it constitutes a security agreement within the meaning of the Financing Act. The servicer pledges in the servicing agreement to file with the North Carolina Secretary of State on or before the date of issuance the filing required by Section 62-172(e) of the Financing Act to perfect the lien of the indenture trustee in the storm recovery property. The seller will represent, at the time of issuance of the Bonds, that no prior filing has been made under the terms of Section 62-172(e) of the Financing Act with respect to the storm recovery property securing the Bonds to be issued other than a filing which provides the indenture trustee with a first priority perfected security interest in the storm recovery property.

Certain items of the storm recovery bond collateral may not constitute storm recovery property and the perfection of the indenture trustee's security interest in those items of collateral would therefore be subject to the UCC or common law and not Section 62-172(e) of the Financing Act. These items consist of our rights in:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the related sale agreement, servicing agreement and administration agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the capital subaccount or any other funds on deposit in the collection account which do not constitute storm recovery charge collections, together with all instruments, investment property or other assets on deposit therein or credited thereto and all financial assets and securities entitlements carried therein or credited thereto which do not constitute storm recovery charge collections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all accounts, accounts receivable, general intangibles, chattel paper, documents, money, investment property, deposit accounts, notes, drafts, acceptances, letters of credit, letter of credit rights, insurance proceeds, condemnation awards, rights to payment of any and every kind and other forms of obligations and receivables, instruments and other property; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • proceeds of the foregoing items.

As a condition to the issuance of the Bonds, we will have made all filings and taken any other action required by the UCC or common law to perfect the lien of the indenture trustee in all the items included in collateral which do not constitute storm recovery property. We will also covenant to take all actions necessary to maintain or preserve the lien and security interest on a first priority perfected basis. We will represent, along with the seller, at the time of issuance of the Bonds, that no prior filing has been made with respect to the storm recovery property by either party under the terms of the UCC, other than a filing which provides

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the indenture trustee with a first priority perfected security interest in the collateral on a parity basis with that securing any outstanding Bonds.

#### Description of Indenture Accounts
 *Collection Account* 

Pursuant to the indenture and the series supplement, we will establish a segregated trust account for each series of Bonds called the "**collection account**" with an eligible institution (as defined below) for the benefit of the indenture trustee. The collection account will be under the sole dominion and exclusive control of the indenture trustee. There shall be established by the indenture trustee in respect of the collection account various subaccounts: a "**general subaccount**", an "**excess funds subaccount**", and a "**capital subaccount**" which need not be separate bank accounts. For administrative purposes, the subaccounts may be established by the indenture trustee as separate accounts that will be recognized individually as subaccounts and collectively as the collection account. All amounts in the collection account not allocated to any other subaccount will be allocated to the general subaccount. Unless the context indicates otherwise, references in this prospectus to the collection account include the collection account and each of the subaccounts contained therein.

The following institutions are "**eligible institutions**" for the establishment of the collection account:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the corporate trust department of the indenture trustee or an affiliate thereof, so long as the indenture trustee or such affiliate have (i) either a short-term deposit or issuer rating from Moody's of at least "P-1" or a long-term unsecured debt or issuer rating from Moody's of at least "A2", and (ii) a short-term deposit or issuer rating from S&P of at least "A-1", or a long-term unsecured debt or issuer rating from S&P of at least "A"; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of "AA-" or higher by S&P and "A2" or higher by Moody's, or (B) a short-term (bank deposit) or issuer rating of "A-1" or higher by S&P and "P-1" or higher by Moody's, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation;

provided, however, that if an eligible institution then being utilized for any purposes under the indenture or the series supplement no longer meets the definition of eligible institution, then the issuing entity shall replace such eligible institution within sixty (60) days of such eligible institution no longer meeting the definition of eligible institution.

 *Permitted Investments for Funds in the Collection Account* 

Funds in the collection account, general subaccount, excess funds subaccount and capital subaccount, may be invested only in such investments as meet the criteria set forth in the indenture and the series supplement.

The indenture trustee will have access to the collection account for the purpose of making deposits in and withdrawals from the collection account in accordance with the indenture and the series supplement. The servicer will select the eligible investments in which funds will be invested, unless otherwise directed by us. The indenture trustee shall have no investment discretion. Absent written instructions to invest, funds shall remain uninvested.

The servicer will remit storm recovery charge payments to the collection account in the manner described under "The Servicing Agreement—Remittances to Collection Account".

 *General Subaccount* 

The general subaccount will hold all funds held in the collection account that are not held in the other subaccounts. The servicer will remit all storm recovery charge payments to the general subaccount. On or prior to each payment date, the indenture trustee will draw on amounts in the general subaccount to pay our expenses and to pay interest and make scheduled payments on the Bonds, and to make other payments and

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transfers in accordance with the terms of the indenture and the series supplement. Funds in the general subaccount will be invested in the eligible investments described above.

 *Excess Funds Subaccount* 

The indenture trustee, at the direction of the servicer, will deposit in the excess funds subaccount storm recovery charge collections, together with the collection of earnings from investment and reinvestment of amounts in the collection account, available with respect to any payment date in excess of amounts necessary to make the payments specified on such payment date. The excess funds subaccount will also hold all investment earnings on the collection account other than the amount of the permitted return in amounts held in the capital account in excess of such amounts.

 *Capital Subaccount* 

In connection with the issuance of the Bonds, DEC, in its capacity as our sole owner, will contribute capital to us in an amount equal to the "**required capital level**". This amount will be at least 0.5% of the initial principal amount of the Bonds issued. DEC will fund this amount directly and not from the proceeds of the sale of the Bonds. This amount will be deposited into the capital subaccount on the issuance date.

In the event that amounts on deposit in the general subaccount and the excess funds subaccount are insufficient to make scheduled payments of principal of and interest on the Bonds and payments of fees and expenses contemplated by the first nine bullet points under "—How Funds in the Collection Account Will Be Allocated" below, the indenture trustee will draw on amounts in the capital subaccount to make such payments up to the amount of such insufficiency.

In the event of any such withdrawal, collected storm recovery charges available on any subsequent payment date that are not necessary to pay scheduled payments of principal of and interest on the Bonds and payments of fees and expenses will be used to replenish any amounts drawn from the capital subaccount. If the Bonds have been retired as of any payment date, the amounts on deposit in the capital subaccount will be released to us, free of the lien of the indenture.

#### How Funds in the Collection Account Will Be Allocated
On each payment date on which payments are due on the Bonds, the indenture trustee will with respect to the Bonds, pay or allocate, at the direction of the servicer, all amounts on deposit in the collection account (including investment earnings thereon) to pay the following amounts in the following priority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.

payment of the indenture trustee's fees, expenses and outstanding indemnity amounts relating to the Bonds in an amount not to exceed annually $200,000 in the then current calendar year (the "**Trustee Cap**"); provided, however, that the Trustee Cap shall be disregarded and inapplicable upon acceleration following the occurrence of an event of default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.

payment of the servicing fee plus any unpaid servicing fees from prior payment dates as described under "The Servicing Agreement—Servicing Compensation";

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 3.

payment of the administration fee to the extent due on that payment date and of the fees of the issuing entity's independent manager plus any unpaid administration or independent management fees from prior payment dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 4.

payment of all other ordinary periodic operating expenses not described above;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 5.

payment of the interest then due, including any past-due interest (together with interest on such past-due interest at the applicable interest rate);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 6.

payment of the principal required to be paid on the final maturity date for each tranche or as a result of acceleration upon an event of default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 7.

payment of the principal then scheduled to be paid in accordance with the expected sinking fund schedule, including any previously unpaid scheduled principal;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 8.

payment of any of our remaining unpaid operating expenses (including any fees, expenses and indemnity amounts owed to the indenture trustee but unpaid due to the limitation in clause 1 above) and any remaining amounts owed pursuant to the basic documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 9.

replenishment of any amounts drawn from the capital subaccount;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 10.

release to DEC of an amount equal to the rate of return (calculated at a rate per annum equal to the rate of interest payable on the longest maturing bond) on the amount contributed to the capital subaccount, including any portion of such rate of return for any prior payment date that has not yet been paid;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 11.

allocation of the remainder collected, if any, to the excess funds subaccount for future payments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 12.

after the Bonds have been paid in full and discharged and all of the foregoing amounts are paid in full, the balance, together with all amounts in the capital subaccount and the excess funds subaccount, to us free and clear of the lien of the indenture.

The servicing fee referred to in clause (2) is described in "The Servicing Agreement", and the amount of the administrative fee referred to in clause (3) above is described in "The Administration Agreement" in this prospectus.

If, on any payment date, funds in the general account are insufficient to make the allocations or payments contemplated by items 1 through 9 above, the indenture trustee will draw from amounts on deposit in the following accounts in the following order up to the amount of the shortfall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 1.

from the excess funds subaccount for allocations and payments contemplated in items 1 through 9; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; 2.

from the capital subaccount for allocations and payments contemplated by items 1 through 8 above;

If the indenture trustee uses amounts on deposit in the capital subaccount to pay those amounts or make those transfers, as the case may be, subsequent adjustments to the related storm recovery charges will take into account, among other things, the need to replenish those amounts.

If, on any payment date, available collections of the storm recovery charges allocable to the Bonds, together with available amounts in the subaccounts, are not sufficient to pay interest due on all outstanding Bonds on that payment date, amounts available will be allocated pro rata based on the amount of interest payable. If, on any payment date, remaining collections of the storm recovery charges, together with available amounts in the subaccounts, are not sufficient to pay principal due and payable on all outstanding Bonds on that payment date (i.e. principal required to be paid on the Bonds on a final maturity date or as a result of acceleration upon an event of default), amounts available will be allocated pro rata based on the principal amount of each tranche then due and payable at its final maturity or upon acceleration. If, on any payment date, remaining collections of the storm recovery charges, together with available amounts in the subaccounts, are not sufficient to pay principal scheduled to be paid on all outstanding Bonds (i.e. payment of the principal then scheduled to be paid on the Bonds in accordance with the expected sinking fund schedule), amounts available will be allocated pro rata based on the principal amounts then scheduled to be paid on the payment date.

With respect to any operating expense payable by us (but only as described in clauses (1) through (4) above) that will become due and payable prior to the next payment date, the administrator, on any business day, may direct the indenture trustee in writing to remit payment of such operating expense, in the amount specified in the written direction, on the next payment date from amounts on deposit in the general subaccount, the excess funds subaccount and the capital subaccount in that order, all as specified in such written direction.

#### Right of Foreclosure
Section 62-172(e)(2)g. of the Financing Act provides that if an event of default or termination occurs under the bonds, the bondholders or their representatives, as secured parties, may foreclose or otherwise

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enforce the lien on the storm recovery property securing such bonds as if they were a secured party under Article 9 of the UCC, and that a court may order that amounts arising from that storm recovery property be transferred to a separate account for the holder's benefit, to which their lien and security interest will apply. Upon application by or on behalf of an indenture trustee to a circuit court in North Carolina, such court shall order sequestration and payment to the indenture trustee of revenues arising from the related storm recovery property.

#### State Pledge
The state pledge in the Financing Act is described under "The Storm Recovery Property and the Financing Act—The Financing Act Provides for the Recovery of Storm Recovery Costs and the Issuance of the Bonds—The Financing Act Contains a State Pledge" in this prospectus. The bondholders and the indenture trustee will be entitled to the benefit of the state pledge and we are authorized to and will include the state pledge on the Bonds. We acknowledge that any purchase by a bondholder of a storm recovery bond is made in reliance on the state pledge.

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#### WEIGHTED AVERAGE LIFE AND YIELD CONSIDERATIONS FOR THE BONDS
The actual amount of principal and interest payments in respect of the Bonds on each semi-annual payment date of each tranche designation of the Bonds and the weighted average life thereof will depend on the timing of receipt of storm recovery charges and the implementation of the true-up mechanism. The aggregate amount of storm recovery charges collected and the rate of principal amortization depends, in part, on energy consumption and the rate of delinquencies and write-offs. The storm recovery charges are required to be adjusted at least every six months based in part on the actual rate of collected storm recovery charges. However, we can give no assurance that the servicer will forecast accurately actual electricity consumption and the rate of delinquencies and write-offs or implement adjustments to the storm recovery charges so as to cause storm recovery charges to be collected at any particular rate. Please read "Risk Factors—Forecasting Servicing Risks—Inaccurate forecasting of electric consumption or collections might reduce scheduled payments on the Bonds" and "DEC's Financing Order—True-Up Mechanism".

If the servicer collects storm recovery charges at a slower rate than forecast during the period of time between mandatory semi-annual true-up adjustments and does not implement an interim true-up adjustment, the Bonds may be retired later than scheduled. The servicer, however, may implement a true-up at any time it believes the slower collections may affect the timely payment of principal of and interest on the Bonds on a scheduled payment date prior to the mandatory semi-annual true-up adjustment.

No prepayment is permitted. Except in the event of an acceleration of the final payment date of the Bonds after an event of default, the Bonds will not be paid at a rate faster than that contemplated in the expected sinking fund schedule for each tranche of the Bonds even if the receipt of collected storm recovery charges is greater than anticipated. Instead, receipts in excess of the amounts necessary to pay debt service on the Bonds in accordance with the applicable expected sinking fund schedules, to pay related fees and expenses and to fund subaccounts of the related collection account will be allocated to the excess funds subaccount. Amounts on deposit in the excess funds subaccount will be taken into consideration in calculating the next true-up adjustment.

Upon an acceleration, due to the nature of our business, payment of principal of the Bonds will only be made as funds become available. Please read "Risk Factors—Risk Associated with the Unusual Nature of the Storm recovery Property—Foreclosure of the indenture trustee's lien on the storm recovery property for the Bonds might not be practical, and acceleration of the bonds before maturity might result in your investment being repaid either earlier or later than expected" and "Risk Factors—You might experience material payment delays as a result of limited sources of payment for the Bonds and limited credit enhancement".

#### Weighted Average Life Sensitivity
Weighted average life refers to the average amount of time from the date of issuance of a security until each dollar of principal of the security has been repaid to the investor. The rate of principal payments on each tranche of Bonds, the aggregate amount of each interest payment on each tranche of Bonds and the actual final payment date of each tranche of Bonds will depend on the timing of the servicer's receipt of storm recovery charges from customers. Changes in the expected weighted average lives of the tranches of the Bonds in relation to variances in actual energy consumption levels (retail electric sales) from forecast levels are shown below.

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| | | | | | |
|:---|:---|:---|:---|:---|:---|
| | | **Weighted Average Life Sensitivity**  | **Weighted Average Life Sensitivity**  | **Weighted Average Life Sensitivity**  | **Weighted Average Life Sensitivity**  |
| **Tranche**  | **Expected <br> Weighted <br> Average Life <br> (Years)**  | **-5% <br> (Standard Deviations <br> from Mean)**  | **-5% <br> (Standard Deviations <br> from Mean)**  | **-15% <br> (Standard Deviations <br> from Mean)**  | **-15% <br> (Standard Deviations <br> from Mean)**  |
| **Tranche**  | **Expected <br> Weighted <br> Average Life <br> (Years)**  | **WAL (yrs)**  | **Change (days)\***  | **WAL (yrs)**  | **Change (days)\***  |

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\*

Number is rounded to whole days

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#### Assumptions
In preparing the analysis above, the following assumptions, among others, have been made:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i) in relation to the initial forecast, the forecast error stays constant over the life of the Bonds and is equal to an overestimate of electricity consumption of 5% (standard deviations from mean) or 15% (standard deviations from mean);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii) the servicer makes timely and accurate semi-annually true-up adjustments (at least quarterly beginning twelve months prior to the scheduled final payment date of the last maturing tranche), but makes no interim true-up adjustments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iii) customer write-off rates are held constant at %, and DEC remits all storm recovery charges on average days after such charges are billed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (iv) for purposes of setting subsequent storm recovery charges, and for purposes of calculating actual storm recovery charge collections, net charge-off rate as a percentage of billed revenue and the average days sales outstanding per customer bill are both held constant at DEC's maximum (most unfavorable) for the most recent years;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (v) ongoing financing costs are equal to projections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (vii) during the first payment period, interest will accrue for approximately months and the storm recovery charges will be collected for approximately months

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (viii) there is no acceleration of the final maturity date of the Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ix) the principal amounts and interest rates of the Bonds of each tranche represent estimates based on current market conditions. Other than as discussed above, there can be no assurance that the weighted average lives or the events of default with respect to the Bonds will be shown.

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#### ESTIMATED ANNUAL FEES AND EXPENSES
Estimated initial annual fees and expenses payable from the storm recovery charges are shown below. For the priorities in application of funds under the indenture and the series supplement, please refer to "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will Be Allocated" in this prospectus.

As set forth in the table below, we are obligated to pay fees to DEC, as servicer, the indenture trustee, our independent manager and DEC, as administrator. We are also obligated to pay DEC an annual return on its invested capital. The following tables illustrate these arrangement.

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| | | |
|:---|:---|:---|
| **Recipient**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Source of Payment**  | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; **Fees and Expenses Payable**  |
| Servicer | storm recovery charge collections and investment earnings | $, per annum (so long as DEC is servicer), payable in installments on each payment date, plus out-of-pocket expenses |
| Indenture Trustee  | storm recovery charge collections and investment earnings | $8,500, per annum, plus expenses and transaction charges, if applicable |
| Administrator | storm recovery charge collections and investment earnings | $50,000, per annum, payable annually, in arrears plus out-of-pocket expenses |
| Independent Manager  | storm recovery charge collections and investment earnings | $, per annum |
| Return on invested capital  | storm recovery charge collections and investment earnings | $, per annum |

---

If DEC or any of its affiliates is not the servicer, an amount agreed upon by the successor servicer and the indenture trustee (acting at the written direction of a majority of bondholders), provided, that the fee shall not exceed 0.60% of the original aggregate principal amount of the Bonds unless such higher fee is approved by the NCUC.

The storm recovery charges will also be used by the indenture trustee for the payment of our other financing costs and expenses relating to the Bonds, such as accounting and audit fees, rating agency fees and legal fees.

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#### THE SALE AGREEMENT
 *The following summary describes the material terms and provisions of the purchase and sale agreement, or "**sale agreement**", pursuant to which we will purchase storm recovery property from the seller. The form of the sale agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.* 

#### Sale and Assignment of the Storm Recovery Property
On the issuance date the seller will sell to us, without recourse its entire right, title and interest in and to the storm recovery property to be transferred to us on that date, subject to the satisfaction of the conditions specified in the sale agreement and the indenture and the series supplement. We will finance the initial purchase of storm recovery property through the issuance of the Bonds. The storm recovery property will include all of the seller's rights under the financing order related to such storm recovery property to impose, bill, charge, collect and receive storm recovery charges, the right to obtain true-up adjustments and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of rights and interests under the financing order.

The Financing Act provides that storm recovery property shall constitute our present property right even though the imposition and collection of storm recovery charges depends on the further acts of the electric utility that have not yet occurred and on future electricity consumption. The Financing Act also provides that an agreement by an electric utility to sell, convey, assign or transfer storm recovery property that expressly states that the transfer is a sale or other absolute transfer is an absolute transfer and true sale of, and is not a pledge of or secured transaction relating to, the seller's right, title and interest in, to and under the storm recovery property. The Financing Act provides that after the transaction contemplated by the financing order, the storm recovery property will not be subject to any claims of the seller or the seller's creditors. As of the date hereof, there are no other creditors holding a security interest in the storm recovery property.

Under the Financing Act, each sale of storm recovery property will constitute a true sale under North Carolina law whether or not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the storm recovery charges are commingled with other amounts held by DEC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • we have any recourse against DEC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC retains any equity interest in the storm recovery property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC acts as a collector of storm recovery charges relating to the storm recovery property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC acts as a servicer of storm recovery charges relating to the storm recovery property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC treats the transfer as a financing for tax, financial reporting or other purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC grants or provides bondholders a preferred right to the storm recovery property or credit enhancement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • DEC applies the true-up mechanism.

In accordance with the Financing Act, a valid and enforceable lien and security interest in the storm recovery property will be created upon the issuance of the financing order and the execution and delivery of the related sale agreement in connection with the issuance of the Bonds. The Financing Act provides that the lien and security interest attaches automatically from the time that value is received for the Bonds and, on perfection through the timely filing of a notice with the North Carolina Secretary of State, will be a continuously perfected lien and security interest in the storm recovery property. The Financing Act further provides that upon the issuance of the financing order, the execution and delivery of the related sale agreement and the related bill of sale and the filing of a notice with the North Carolina Secretary of State in accordance with the Financing Act, the transfer of the storm recovery property will be perfected as against all third persons, including subsequent judicial or other lien creditors.

#### Conditions to the Sale of Storm Recovery Property
Our obligation to purchase and the seller's obligation to sell storm recovery property on the issuance date is subject to the satisfaction or waiver of each of the following conditions:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • on or prior to the issuance date, the seller shall have delivered to us a duly executed bill of sale identifying the storm recovery property to be conveyed on that date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • on or prior to the issuance date, the seller shall have obtained a financing order from the NCUC creating the storm recovery property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • as of the issuance date, the seller may not be insolvent and may not be made insolvent by the sale of storm recovery property to us, and the seller may not be aware of any pending insolvency with respect to itself;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • as of the issuance date, the representations and warranties of the seller in the sale agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), no breach of any covenant or agreement of the seller contained in the sale agreement has occurred and is continuing, and the servicer shall not have defaulted or be in default under the servicing agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • as of the issuance date, we must have sufficient funds available to pay the purchase price for the storm recovery property to be conveyed and all conditions to the issuance of the Bonds intended to provide the funds set forth in the indenture and the series supplement must have been satisfied or waived;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller must receive and deliver to us and to the rating agencies any opinions of counsel required by the rating agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller must receive and deliver to us and the indenture trustee an opinion or opinions of outside tax counsel (as selected by the seller, and in form and substance reasonably satisfactory to us) to the effect that (i) we will not be subject to U.S. federal income tax as an entity separate from its sole owner, (ii) that the Bonds will be treated as debt of our sole owner for U.S. federal income tax purposes and (iii) for U.S. federal income tax purposes, the issuance of the Bonds will not result in gross income to the seller;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • on and as of the issuance date, our certificate of formation, our limited liability company agreement, the servicing agreement, the sale agreement, the intercreditor agreements, the indenture, the series supplement, the Financing Act and the financing order must be in full force and effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the Bonds shall have received the highest credit ratings possible;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller must deliver to us and the indenture trustee, an officer's certificate confirming the satisfaction of each of these conditions; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller shall have received the purchase price.

#### Seller Representations and Warranties
In the sale agreement, the seller will represent and warrant to us, as of the issuance date, to the effect, among other things, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • subject to the clause below regarding assumptions used in calculating the storm recovery charges as of the issuance date, all written information, as amended or supplemented from time to time, provided by the seller to us with respect to the storm recovery property (including the expected sinking fund schedule and the financing order relating to the storm recovery property) is true and correct in all material respects and does not omit any material facts and all historical data for the purpose of calculating the initial storm recovery charges in the issuance advice letter and the initial true-up adjustment request are true and correct, and the assumptions used for such calculations are reasonable and made in good faith;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the transfer, sale, assignment and conveyance of the storm recovery property constitutes a sale or other absolute transfer of all of the seller's right, title and interest in the storm recovery property to us; upon the execution and delivery of the sale agreement, the seller will have no right, title or interest in the storm recovery property and the storm recovery property would not be part of the estate of the seller as debtor in the event of a filing of a bankruptcy petition by or against the seller;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller is not aware (after due inquiry) of any judgment or tax lien filings against us or the seller;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • under the laws of the State of North Carolina (including the Financing Act) and the United States in effect on the issuance date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the financing order pursuant to which the rights and interests of the seller have been created, including the right to impose, bill, charge, collect and receive the storm recovery charges and the interest in and to the storm recovery property, has become final and non-appealable and is in full force and effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • as of the issuance of the Bonds, those Bonds are entitled to the protection provided in the Financing Act and, accordingly, the financing order and the storm recovery charges are not revocable by the NCUC;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • as of the issuance of the Bonds, revisions to DEC's electric tariff to implement the storm recovery charges have been filed and are in full force and effect, such revisions are consistent with the financing order, and any electric tariff implemented consistent with a financing order issued by the NCUC is not subject to modification by the NCUC except for true-up adjustments made in accordance with the Financing Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the process by which the financing order was adopted and approved complies with all applicable laws, rules and regulations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no other approvals, authorizations, consents, orders or other actions or filings, other than filings under the Financing Act or the UCC of North Carolina or Delaware, are required for the seller to execute, deliver and perform its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the servicer in the future pursuant to the servicing agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • under the Financing Act, the State of North Carolina and its agencies, including the NCUC, may not take any action which would impair, reduce or alter the value of the storm recovery property, or impair the storm recovery charges to be imposed, collected or remitted for the benefit of the related bondholders, until the principal, interest or other charges incurred or contracts to be performed in connection with the Bonds are paid or performed in full. Furthermore, under the contract clause of the United States Constitution, the State of North Carolina, including the NCUC, cannot take any action that substantially impairs the rights of the related bondholders unless such action is a reasonable exercise of the State of North Carolina's sovereign powers and of a character reasonable and appropriate to further a significant and legitimate public purpose. Under the Takings Clause of the United States Constitution and the Law of the Land Clause of the North Carolina Constitution, the State of North Carolina would likely be required to pay just compensation to the bondholders if a court of competent jurisdiction determines that a repeal or amendment of the Financing Act or any other action taken by the State of North Carolina in contravention of the state pledge, (a)constitutes a permanent appropriation of a substantial property interest of the bondholders in the storm recovery property or (b) substantially impairs the value of the storm recovery property so as to unduly interfere with the reasonable expectations of the related bondholders arising from their investment in the Bonds, unless such court finds that just compensation is provided to the bondholders; but nothing in this paragraph precludes any limitation or alteration if full compensation is made by

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law for the full protection of the storm recovery charges and of the related bondholders or any assignee or party entering into a contract with the seller.

These representations and warranties made above by the seller will survive the execution and delivery of the sale agreement and our pledge of the storm recovery property to the indenture trustee. The seller will further represent and warrant that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller is a limited liability company duly organized, validly existing and in good standing under the laws of North Carolina, with requisite power and authority to own its properties and conduct its business as of the transfer date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller has the requisite power and authority to execute and deliver the sale agreement and to carry out its terms; the seller has full power and authority to own the related storm recovery property and sell and assign the storm recovery property to us, and the seller has duly authorized such sale and assignment to us by all necessary action; and the execution, delivery and performance of the sale agreement has been duly authorized by the seller by all necessary action;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the sale agreement constitutes a legal, valid and binding obligation of the seller, enforceable against it in accordance with its terms, subject to bankruptcy, receivership, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity, regardless of whether considered in a proceeding in equity or at law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • there is no order by a court providing for the revocation, alteration, limitation or other impairment of the Financing Act, financing order, storm recovery property or storm recovery charges, or any rights arising under them, or that seeks to enjoin the performance of any obligations under the financing order which is adverse to the position of the related storm recovery bondholders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • there are no proceedings or, to the seller's knowledge, investigations pending or proceedings threatened, before any court, federal or state regulatory body, administrative agencies or other governmental instrumentality having jurisdiction over the seller or its properties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • asserting the invalidity of the basic documents, the related Bonds, the Financing Act or the financing order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • seeking to prevent the issuance of the Bonds or the consummation of any of the transactions contemplated by the basic documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • seeking a determination or ruling that could reasonably be expected to materially and adversely affect the performance by the seller of its obligations under, or the validity or enforceability of, the Bonds, the basic documents or the financing order; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • challenging the seller's treatment of the Bonds as debt of the seller for U.S. federal income tax purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Financing Act or with the North Carolina Secretary of State or the Delaware UCC, are required for the seller to execute, deliver and perform its obligations under the sale agreement except those which have previously been obtained or made or are required to be made by the servicer in the future pursuant to the related servicing agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • with respect to the Financing Act and the financing order:

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the financing order has been issued by the NCUC in accordance with the Financing Act in compliance with all applicable laws, rules and regulations; the financing order became effective pursuant to the Financing Act and is in full force and effect and final and nonappealable, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the Bonds are entitled to the protections provided by the Financing Act and the financing order is not subject to impairment, and the right to impose, collect and adjust the storm recovery charge is irrevocable and not subject to reduction, impairment or adjustment, except for the periodic adjustments to the storm recovery charges provided for in the financing order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • apart from amending the Constitution of the State of North Carolina by initiative, the voters of the State of North Carolina have no initiative powers to amend, repeal or revoke the Financing Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • for purposes of the Financing Act, the storm recovery property constitutes a present property right that will continue to exist until the related Bonds are paid in full and the financing costs associated with those Bonds have been recovered in full;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the storm recovery property consists of (a) all rights and interest of the seller under the financing order, including the right to impose, bill, charge, collect and receive storm recovery charges; (b) the right under the financing order to obtain true-up adjustments of the storm recovery charges and (c) all revenues, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interest described in (a) and (b);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • after giving effect to the sale of the storm recovery property under the sale agreement, DEC:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • is solvent and expects to remain solvent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • is not engaged and does not expect to engage in a business for which its remaining property represents unreasonably small capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • reasonably believes that it will be able to pay its debts as they become due; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • notwithstanding the foregoing, the seller makes no representation or warranty that amounts collected from the storm recovery charges will be sufficient to meet payment obligations on the Bonds or assumptions made in calculating the storm recovery charges will in fact be realized.

Certain of the representations and warranties that the seller will make in the sale agreement involve conclusions of law. The seller will make those representations and warranties in order to reflect the good faith understanding of the legal basis on which the bondholders are purchasing the Bonds and to reflect the agreement that, if this understanding proves to be incorrect or inaccurate, the seller will be obligated to indemnify us under certain circumstances to the same extent as if the seller had breached its representations and warranties under the sale agreement. Please read "—Indemnification."

The seller will not be in breach of any representation or warranty as a result of any change in law by means of any legislative enactment, constitutional amendment or voter initiative.

#### Covenants of the Seller
In the sale agreement, the seller will make the following covenants:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • So long as any of the related Bonds are outstanding, the seller will keep in full force and effect its existence and remain in good standing or equivalent status under the laws of the jurisdiction of its organization, and will obtain and preserve its qualifications to do business in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of the sale agreement and each other instrument or agreement to which the seller is a party necessary to the proper administration of the sale agreement and the transactions contemplated thereby.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Except for the conveyances under the sale agreement or any lien for our benefit, the related bondholders or the indenture trustee, the seller will not sell, pledge, assign or transfer to any other

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person, or grant, create, incur, assume or suffer to exist any lien on, any of the related storm recovery property, whether existing as of the transfer date or thereafter created, or any interest therein. The seller will not at any time assert any lien against or with respect to any related storm recovery property, and will defend the right, title and interest of DEC NC Storm Funding II and of the indenture trustee as our assignee in, to and under such storm recovery property against all claims of third parties claiming through or under the seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller will use the proceeds of the sale of the related storm recovery property in accordance with the financing order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • If the seller is not the servicer and the seller receives any collections of the storm recovery charges with respect to the storm recovery property or the proceeds thereof, the seller will pay the servicer all payments received by the seller in respect thereof as soon as practicable after receipt thereof by the seller, but in no event later than two business days after the seller becomes aware of such receipt.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller will notify us and the indenture trustee, in writing, promptly after becoming aware of any lien on any of the storm recovery property, other than the conveyances under the sale agreement, indenture and series supplement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller will materially comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any governmental authority applicable to it, except to the extent that failure to so comply would not materially adversely affect our or the indenture trustee's interests in the storm recovery property under any of the basic documents, the timing or amount of storm recovery charges payable by customers or of seller's performance of its material obligations under the sale agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • So long as any of the Bonds are outstanding:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will treat storm recovery property as the issuing entity's property for all purposes and not that of the seller, except for financial accounting, U.S. federal income tax purposes and state income and franchise tax purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will treat such Bonds as debt of DEC NC Storm Funding II and not that of the seller, except for financial accounting and U.S. federal income tax purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will disclose in its financial statements that it is not the owner of the related storm recovery property and that our assets are not available to pay creditors of the seller or its affiliates (other than us);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will not own or purchase any other of our storm recovery bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will disclose the effects of all transactions between us and the seller in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller agrees that, upon the sale by the seller of storm recovery property to us pursuant to the sale agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to the fullest extent permitted by law, including the Financing Act and applicable regulations of the NCUC, we will have all of the rights originally held by the seller with respect to the related storm recovery property, including the right to collect any amounts payable by any customer in respect of such storm recovery property, notwithstanding any objection or direction to the contrary by the seller; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any payment by any customer to us of storm recovery charges will discharge that customer's obligations in respect of the related storm recovery property to the extent of such payment, notwithstanding any objection or direction to the contrary by the seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • So long as any of the Bonds are outstanding:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • in all proceedings relating directly or indirectly to the storm recovery property, the seller will affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial accounting or tax purposes);

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will not make any statement or reference in respect of the storm recovery property that is inconsistent with our ownership interest (other than for financial accounting or tax purposes);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller will not take any action in respect of the related storm recovery property except as contemplated by the basic documents; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • neither we nor the seller shall take any action, file any tax return or make any election inconsistent with our treatment, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the seller (or, if relevant, from another sole owner).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller will execute and file, or cause to be executed and filed, such filings required by law to fully preserve, maintain protect and perfect our ownership interest in the related storm recovery property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller will institute any action or proceeding necessary to compel performance by the NCUC, the State of North Carolina or any of their respective agents of any of their obligations or duties under the Financing Act, the financing order or the issuance advice letter. The seller also agrees to take those legal or administrative actions that may be reasonably necessary to attempt (i) to protect us and the indenture trustee from claims, state actions or other actions or proceedings of third parties which, if successfully pursued, would result in a breach of any representation or warranty of the seller in the sale agreement and (ii) to block or overturn any attempts to cause a repeal of, modification of or supplement to the Financing Act, the financing order, any issuance advice letter or the rights of the bondholders by legislative enactment or constitutional amendment that would be materially adverse to us, the indenture trustee or the bondholders or which would otherwise cause an impairment of the rights of DEC NC Storm Funding II or the indenture trustee or the bondholders. The costs of any such actions or proceedings undertaken by the seller will be reimbursed by us as an operating expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • So long as any of the related Bonds are outstanding, the seller will pay, and will cause each of its affiliates (including the issuing entity) to pay, all material taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a lien on the storm recovery property, provided that no such tax need be paid if the seller or one of its affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the seller or such affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller will comply with all filing requirements, including any post closing filings, in accordance with the financing order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Promptly after obtaining knowledge of any breach in any material respect of its representations and warranties or covenants in the sale agreement, the seller will notify us, the indenture trustee, the NCUC and the rating agencies in writing of the breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Even if the sale agreement or indenture is terminated, the seller will not, prior to the date which is one year and one day after the termination of the indenture and payment in full of the Bonds or other amounts owed under the indenture, acquiesce, petition or otherwise invoke or cause us to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against us under any U.S. federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official or any substantial part of our property, or ordering the winding up or liquidation of our affairs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • Upon our request, the seller will execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out more effectively the provisions and purposes of the sale agreement with notice to the NCUC and the Public Staff.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • The seller shall not continue as or become a party to any (i) trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from North Carolina electric distribution customers unless the indenture trustee, the seller and the other parties to such additional arrangement shall have entered into a joinder or amendment to

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the intercreditor agreements in connection therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude storm recovery property (including storm recovery charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any other affiliate property consisting of charges similar to the storm recovery charges sold pursuant to the sale agreement, payable by customers pursuant to the Financing Act or any similar law, unless the seller and the other parties to such arrangement shall have entered into a joinder or amendment to the intercreditor agreements in connection with any agreement or similar arrangement described in the sale agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • So long as any of the Bonds are outstanding, the seller shall not sell any "storm recovery property" or similar property, to secure another issuance of storm recovery bonds or similar Bonds unless the rating agency condition has been satisfied.

#### Indemnification
The seller will indemnify, defend and hold harmless us, the indenture trustee (for itself and for the benefit of the bondholders) and any of our and the indenture trustee's respective officers, directors, managers, including our independent manager, employees and agents against:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any and all amounts of principal of and interest on the Bonds not paid when due or when scheduled to be paid;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any deposits required to be made by or to us under the basic documents or the financing order that are not made when required; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses that may be imposed on or asserted against any person, other than any liabilities, obligations or claims for or payments of principal of or interest on the Bonds, together with any reasonable costs and expenses actually incurred by such person,

in each case, as a result of a breach by the seller of any of its representations, warranties and covenants in the sale agreement, except to the extent of losses either resulting from the willful misconduct, bad faith or gross negligence of such indemnified persons or resulting from a breach of a representation or warranty made by such indemnified persons in any of the basic documents that gives rise to the seller's breach of a covenant. The seller will have a 30-day opportunity to cure upon notice from us of a material breach of a covenant. Furthermore, bondholders shall be entitled to enforce their rights against the seller under this paragraph solely through a course of action brought on their behalf by the indenture trustee.

The seller will indemnify us and the indenture trustee (for itself and for the benefit of the bondholders)and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such person or entity from and against, any and all taxes (other than taxes imposed on the bondholders as a result of their ownership of Bonds) that may at any time be imposed on or asserted against any such person or entity as a result of (i) the sale and assignment of the storm recovery property to us, (ii) our ownership and assignment of the storm recovery property, (iii) the issuance and sale by us of the Bonds or (iv) the other transactions contemplated in the basic documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such person or entity to withhold or remit taxes with respect to payments on the Bonds.

The NCUC may, subject to the outcome of an appropriate proceeding, take such action as it considers necessary or appropriate under its regulatory authority to require the seller to provide appropriate redress to customers as a result of the seller's material breach of the seller's (i) representations or warranties in the sale agreement (except for the representations and warranties with respect to the financing order, state action and creation of storm recovery property) or (ii) any material breach of the seller's covenants in the sale agreement (except for the covenants to the extent that they require the seller to institute proceedings against the NCUC or the State of North Carolina to compel performance of their obligations under the Financing Act, and any financing order or issuance advice letter).

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The seller's obligations provided for in the sale agreement will survive any repeal of, modification of, supplement to, or judicial invalidation of, the Financing Act or the financing order and will survive the resignation or removal of the indenture trustee or the termination of the sale agreement and will rank pari passu with other general, unsecured obligations of the seller. The seller shall not indemnify any person or entity otherwise indemnified under the sale agreement for any changes in law after the issuance date, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision.

#### Amendment
The sale agreement may be amended with the prior written consent of the indenture trustee and the satisfaction of the rating agency condition and if any amendment would adversely affect in any material respect the interest of any bondholder, the consent of a majority of bondholders of each affected tranche of Bonds. In determining, whether a majority of bondholders have consented, Bonds owned by us or any affiliate of us shall be disregarded, except that, in determining whether the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall be protected in relying upon any such consent, the indenture trustee shall only be required to disregard any Bonds it actually knows to be so owned. An amendment is subject to the objection of the NCUC within the time periods and subject to the conditions set forth in the sale agreement. We will notify the rating agencies promptly after the execution of any such amendment or consent. Please read "Description of the Storm Recovery Bonds—Procedure for Obtaining Consent or Deemed Consent of the NCUC" in this prospectus.

#### Assumptions of the Obligations of the Seller
Any person (a) into which the seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the seller, (b) which results from the division of the seller into two or more persons and which succeeds to all or substantially all of the electric distribution business of the seller, (c) which may result from any merger or consolidation to which the seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the seller, (d) which may succeed to the properties and assets of the seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the seller, and which person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the seller under the sale agreement, shall be the successor to the seller thereunder without the execution or filing of any document or any further act by any of the parties so long as the conditions of any such assumption are met. The conditions include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • immediately after giving effect to such transaction, no representation or warranty made in the sale agreement will have been breached, and no servicer default, and no event that, after notice or lapse of time, or both, would become a servicer default will have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller shall have delivered to us and to the indenture trustee an officers' certificate and an opinion of counsel stating that such consolidation, merger or succession and each agreement of assumption comply with the requirements of the sale agreement and that all conditions precedent relating to such transaction have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller shall have delivered to us, to the indenture trustee and the rating agencies an opinion of counsel stating, in the opinion of such counsel, either (a) all filings to be made by DEC, in its capacity as seller or as servicer, including filings under the Financing Act with the North Carolina Secretary of State and the UCC, that are necessary to preserve our interests and the interests of the indenture trustee in the related storm recovery property have been executed and filed or (b) that no such action is necessary to preserve such interests,

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller shall have given the rating agencies prior written notice of the transaction, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the seller shall have delivered to us, to the indenture trustee and to the rating agencies an opinion of an independent tax counsel to the effect that, for U.S. federal income tax purposes, such consolidation or other succession to, and assumption of, the obligations of the seller will not result in a material

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adverse U.S. federal income tax consequence to us or to the seller, the indenture trustee or the holders of the outstanding Bonds.

So long as the conditions of any such assumption are met, the depositor will automatically be released from its obligations under the sale agreement.

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#### THE SERVICING AGREEMENT
 *The following summary describes the material terms and provisions of the servicing agreement pursuant to which the servicer is undertaking to service the storm recovery property. The form of the servicing agreement has been filed as an exhibit to the registration statement of which this prospectus forms a part.* 

#### Servicing Procedures
The servicer will manage, service and administer, bill, collect and post all payments in respect of, the storm recovery property according to the terms of the servicing agreement. The servicer's duties will include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • calculating consumption, billing the storm recovery charges, collecting the storm recovery charges from customers and posting all collections;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • responding to inquiries by customers, the NCUC or any other governmental authority regarding the storm recovery property or storm recovery charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the issuing entity);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • processing and depositing collections and making periodic remittances;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • furnishing periodic and current reports to us, the NCUC, the rating agencies and the indenture trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • making all filings with the NCUC and taking all other actions necessary to perfect our ownership interests in and the indenture trustee's first priority lien on the storm recovery property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • making all filings and taking such other action as may be necessary to perfect the indenture trustee's lien on and security interest in all collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • selling, as our agent, as our interests may appear, defaulted or written off accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • taking all necessary action in connection with true-up adjustments; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • performing other duties specified under the financing order.

The servicer will be required to notify us, the indenture trustee and the rating agencies in writing of any laws or NCUC regulations promulgated after the execution of the servicing agreement that have a material adverse effect on the servicer's ability to perform its duties under the servicing agreement. The servicer is also authorized to execute and deliver documents and to make filings and participate in proceedings on our behalf.

In addition, upon our reasonable request or the reasonable request of any rating agency or the NCUC, the servicer will provide to us, the NCUC or any rating agency public financial information about the servicer and any material information about the storm recovery property that is reasonably available, as may be reasonably necessary and permitted by law to enable us, the Commission, or any rating agency to monitor the servicer's performance, and, so long as any Bonds are outstanding, within a reasonable time after written request thereof, any information available to the servicer or reasonably obtainable by it that is necessary to calculate the storm recovery charges applicable to each storm recovery rate class. The servicer will also prepare any reports required to be filed by us with the SEC, as further described below, and will cause to be delivered required opinions of counsel to the effect that all filings with the State of North Carolina and the Secretary of State of the State of Delaware necessary to preserve, protect and perfect the interests of the indenture trustee in the storm recovery property have been made.

#### Servicing Standards and Covenants
The servicing agreement will require the servicer, in servicing and administering the storm recovery property, to employ or cause to be employed procedures and exercise or cause to be exercised the same care and diligence it customarily employs and exercises with respect to billing, collection and posting activities it conducts for its own account and, if applicable, for others.

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The servicing agreement will require the servicer to implement procedures and policies to ensure that customers remit the storm recovery charges to the servicer on our behalf and on behalf of the bondholders. The servicer will also monitor payments and will impose collection policies on customers, as permitted under the financing order and the rules of the NCUC.

The servicing agreement will require the servicer to (i) manage, service, administer, bill, charge, collect, receive and post collections in respect of the storm recovery property with reasonable care and in material compliance with applicable requirements of law, including all applicable regulations of the NCUC, (ii) calculate storm recovery charges in accordance with the Financing Act; (iii) follow standards, policies and procedures in performing its duties as servicer that are customary in the electric distribution industry, (iv) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the storm recovery property and to impose, bill, collect and post the storm recovery charges, (v) comply with all requirements of law, including all applicable regulations of the NCUC applicable to and binding on it relating to the storm recovery property, (vi) file all reports with the NCUC required by the financing order, (vii) file and maintain the effectiveness of financing statements filed with the North Carolina Secretary of State with respect to the property transferred under the sale agreement and (viii) take such other action on our behalf to ensure that the lien of the indenture trustee on the collateral remains perfected and of first priority, including any action required pursuant to any intercreditor agreement. The servicer shall follow customary and usual practices and procedures as it deems necessary or advisable in servicing the storm recovery property, which, in the servicer's judgment, may include taking legal action at our expense but subject to the priority of payments set forth in the indenture.

Notwithstanding anything to the contrary in the servicing agreement, the duties of the servicer set forth in the servicing agreement shall be qualified and limited in their entirety by the Financing Act, the financing order, any NCUC regulation and the U.S. federal securities laws and the rules and regulations promulgated thereunder, as in effect at the time such duties are to be performed.

The servicing agreement will also require the servicer to provide various reports regarding the storm recovery charges and allocation of the storm recovery charges among various classes of customers and payments to the bondholders, in each case as are necessary to effect collection, allocation and remittance of payments in respect of storm recovery charges and other collected funds as required under the basic documents.

The servicer will be responsible for instituting or maintaining any action or proceeding to compel performance by the State of North Carolina or the NCUC of their respective obligations and duties under the Financing Act, the financing order. The servicer will assist us in taking such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of, modification of or supplement to the Financing Act, the financing order or the rights of holders of storm recovery property by legislative enactment, constitutional amendment or other means that would be adverse to bondholders. Any costs associated with such legal or administrative action will be borne by us as an operating expense; provided, however, that the servicer will be obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses in taking such actions in accordance with the indenture, and is not required to advance its own funds to satisfy these obligations.

In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of DEC's electric distribution facilities, the servicer will assert that the court ordering such condemnation must treat such municipality as a successor to DEC under the Financing Act and the financing order.

Each servicing agreement will also designate the servicer as the custodian of our records and documents.

#### The NCUC's True-Up Mechanism
The Financing Act permits and the financing order requires that storm recovery charges be reviewed and adjusted at least semi-annually (and beginning twelve months prior to the last scheduled payment date of the latest maturing tranche, at least quarterly) to correct for any overcollection or undercollection of the

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storm recovery charges or to otherwise ensure the timely payment of the periodic payment requirement. Under the servicing agreement, the servicer will make adjustments to the storm recovery charges at least semi-annually.

In addition to the semi-annual true-up adjustment, the servicer is authorized to make interim adjustments at any time for any reason to ensure the timely payment of the periodic payment requirement. Necessary true-up adjustments are to be made to correct for any overcollection or undercollection of the storm recovery charges or to otherwise ensure the timely payment of the periodic payment requirement.

There are no caps on the level of storm recovery charges that may be imposed on customers as a result of the true-up process. In addition to the semi-annual true-up adjustments, the servicer (a) is also required to implement quarterly true-up adjustments beginning twelve months prior to the latest scheduled final payment date for such Bonds, and (b) may request an interim true-up adjustment at any time for any reason to ensure timely payment of principal of and interest on the Bonds and other required amounts and charges owing in connection with the Bonds on the next payment date. For more information on the true-up mechanism, please read "DEC's Financing Order—True-Up Mechanism".

Each true-up adjustment will allocate the revenue requirement among all customer rate classes in accordance with the allocation methodology approved in DEC's last general rate case approved by the NCUC.

As part of each true-up adjustment, the servicer will calculate the storm recovery charges that must be billed in order to generate the revenues for the semi-annual period necessary to result in:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all accrued and unpaid interest on the Bonds being paid in full;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the outstanding principal balance of the Bonds equaling the amount provided in the expected sinking fund schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the amount on deposit in the capital subaccount equaling the required capital level; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • all of our other fees, expenses and indemnities being paid. by the next scheduled payment date.

There is no cap on the level of storm recovery charges that may be imposed on customers as a result of the true-up mechanism to pay principal of and interest on the Bonds when due and ongoing financing costs.

Upon the filing of a true-up adjustment letter made pursuant to the financing order, the NCUC shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 30 days following the servicer's true-up filing; and that notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 30 days of the servicer's filing of a true-up adjustment letter. No potential modification to correct an error in a true-up adjustment letter shall delay its effective date and any correction or modification which could not be made prior to the effective date shall be made in the next true-up adjustment letter. Upon administrative approval or the passage of 30 days without notification of a mathematical or clerical error, no further action of the NCUC will be required prior to implementation of the true-up.

#### Remittances to Collection Account
The servicer will remit storm recovery charges directly to the indenture trustee on a daily basis. The servicer will remit storm recovery charges based on estimated collections using a weighted average balance of days outstanding ("**ADO**") on DEC's retail bills. Storm recovery charge collections remitted will represent the charges estimated to be received for any period based upon the ADO and an estimated system-wide write-off percentage.

Each day on which those remittances are made is referred to as a daily remittance date. The estimated payments are made from collections received from customers.

No less often than semi-annually, the servicer will reconcile remittances of estimated storm recovery charge collections with actual storm recovery charge payments received by the servicer and remitted to the indenture trustee to more accurately reflect the amount of billed storm recovery charges that should have been

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remitted, based on ADO and the actual system-wide write-off percentage. To the extent the remittances of estimated payments arising from the storm recovery charges exceed the amounts that should have been remitted based on actual system-wide write-offs, the servicer will be entitled to withhold the excess amount from any subsequent remittance to the indenture trustee until the balance of such excess is reduced to zero. To the extent the remittances of estimated payments arising from the storm recovery charges are less than the amount that should have been remitted based on actual system wide write-offs, the servicer will remit the amount of the shortfall to the indenture trustee within two business days. Although the servicer will remit estimated storm recovery charge collections for the storm recovery bonds to the indenture trustee, the servicer will not be obligated to make any payments on the Bonds.

At least annually, the servicer also will remit to the indenture trustee, for our benefit, any late payment fees received from customers with respect of storm recovery charges.

The servicer has agreed and acknowledged that it holds all storm recovery charge collections for the storm recovery bonds received by it and any other proceeds for the storm recovery bond collateral received by it for the benefit of the indenture trustee and the bondholders and that all such amounts will be remitted by the servicer without any surcharge, fee, offset, charge or other deduction. The servicer has further agreed not to make any claim to reduce its obligation to remit all storm recovery charge payments collected by it in accordance with the servicing agreement.

#### Servicing Compensation
The servicer will be entitled to receive an annual servicing fee with respect to the Bonds in an amount equal to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • 0.05% on an annualized basis of the original principal amount of Bonds plus out-of-pocket expenses so long as the servicer remains DEC or an affiliate; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • if DEC or any of its affiliates is not the servicer, an amount agreed upon by the successor servicer and the indenture trustee, provided, that the fee shall not exceed 0.60% of the original aggregate principal amount of the Bonds unless a higher fee is approved by the NCUC.

The servicing fee shall be paid semi-annually, with half of the servicing fee being paid on each payment date, except for the amount of the servicing fee to be paid on the first payment date in which the servicing fee then due will be calculated based on the number of days the Servicing Agreement has been in effect. The indenture trustee will pay the servicing fee on each payment date (together with any portion of the servicing fee that remains unpaid from prior payment dates) to the extent of available funds prior to the distribution of any interest on and principal of the Bonds. The servicer shall be entitled to be reimbursed by the issuing entity for certain out-of-pocket expenses, including filing fees and reasonable fees and expenses for attorneys, accountants, printing or other professional services retained by us and paid for by the servicer (or procured by the servicer on our behalf and paid for by the servicer) to meet our obligations under the basic documents. Except for those reimbursable expenses, the servicer shall be required to pay all other costs and expenses incurred by the servicer in performing its activities hereunder (but, for the avoidance of doubt, excluding any such costs and expenses incurred by DEC in its capacity as administrator). There is no limit on the amount of these out-of-pocket expenses, and they will be recovered as ongoing financing costs through the collection of the storm recovery charges and paid in accordance with the payment waterfall in the Indenture. See "Security for the Storm Recovery Bonds—How Funds in the Collection Account Will Be Allocated" in this prospectus.

#### Servicer Representations and Warranties
In the servicing agreement, the servicer will represent and warrant to us, the indenture trustee and the NCUC as of the issuance date of the Bonds, among other things, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, to service the storm recovery property and hold the records related to the storm recovery property, and to execute, deliver and carry out the terms of the servicing agreement and the intercreditor agreements;

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&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the storm recovery property as required under the servicing agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the servicer's business, operations, assets, revenues or properties or to its servicing of the storm recovery property);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the execution, delivery and performance of the terms of the servicing agreement and the intercreditor agreements have been duly authorized by all necessary action on the part of the servicer under its organizational or governing documents and laws;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • each of the servicing agreement and the intercreditor agreements constitutes a legal, valid and binding obligation of the servicer, enforceable against it in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors' rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the consummation of the transactions contemplated by the servicing agreement and the intercreditor agreements do not conflict with, result in any breach of or constitute (with or without notice or lapse of time) a default under the servicer's organizational documents or any indenture or other agreement or instrument to which the servicer is a party or by which it or any of its property is bound, result in the creation or imposition of any lien upon the servicer's properties pursuant to the terms of any such indenture or agreement or other instrument (other than any lien that may be granted in favor of the indenture trustee for the benefit of bondholders under the basic documents) or violate any existing law or any existing order, rule or regulation applicable to the servicer of any governmental authority having jurisdiction over the servicer or its properties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • to the servicer's knowledge, there are no proceedings or investigations pending or, to the servicer's knowledge, threatened against the servicer before any court, federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the servicer or its properties: (i) seeking to prevent issuance of the Bonds or the consummation of the transactions contemplated by the servicing agreement or any of the other basic documents; (ii) seeking any determination or ruling that might materially and adversely affect the performance by the servicer of its obligations under, or the validity or enforceability against the servicer of, the servicing agreement or any of the other basic documents; or (iii) relating to the servicer and which might materially and adversely affect the federal or state income, gross receipts or franchise tax attributes of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • no governmental approvals, authorizations, consents, orders or other actions or filings with any governmental authority are required for the servicer to execute, deliver and perform its obligations under the servicing agreement except those that have previously been obtained or made, those that are required to be made by the servicer in the future pursuant to the servicing agreement or the intercreditor agreements and those that the servicer may need to file in the future to continue the effectiveness of any financing statements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • each report or certificate delivered in connection with any filing made to the NCUC by the servicer on our behalf with respect to the storm recovery charges or true-up adjustments will constitute a representation and warranty by the servicer that each such report or certificate, as the case may be, is true and correct in all material respects. To the extent that any such report or certificate is based in part or upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the servicer with respect thereto will be limited to the representation and warranty that such assumptions, (forecasts or other predictions of future events are reasonable based upon historical performance and the facts known to the servicer on the date such report or certificate is delivered).

The servicer, the indenture trustee and we are not responsible as a result of any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the servicer's failure to make any filings with the NCUC required by the servicing agreement in a timely and correct manner or any breach by the servicer of its duties under the servicing agreement that adversely affects the storm

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recovery property or the true-up adjustments), by the NCUC in any way related to the storm recovery property or in connection with any true-up adjustment, the subject of any such filings, any proposed true-up adjustment or the approval of any revised storm recovery charges and the scheduled adjustments thereto. Except to the extent that the servicer otherwise is liable under the provisions of the servicing agreement, the servicer shall have no liability whatsoever relating to the calculation of any revised storm recovery charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the servicer have any liability whatsoever as a result of any person or entity, including the bondholders, not receiving any payment, amount or return anticipated or expected or in respect of any bond generally.

#### The Servicer Will Indemnify DEC NC Storm Funding II and Other Entities in Limited Circumstances
The servicer will indemnify, defend and hold harmless DEC NC Storm Funding II and the indenture trustee (for itself and for the related bondholders' benefit) and the independent manager and each of their respective trustees, officers, directors, employees and agents from any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, arising as a result of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer's willful misconduct, bad faith or negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the servicing agreement and the intercreditor agreements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer's material breach of any of its representations or warranties that results in a default by the servicer under the servicing agreement or the intercreditor agreements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • litigation and related expenses relating to its status and obligations as servicer (other than any proceeding the servicer is required to institute under the servicing agreement).

The servicer will not be liable, however, for any liabilities, obligations, losses, damages, payments or claims, or reasonable costs or expenses, resulting from the willful misconduct, bad faith or gross negligence of the party seeking indemnification, or resulting from a breach of a representation or warranty made by any such person or entity in any of the basic documents that give rise to the servicer's breach.

Except for payment of the servicing fee and payment of the purchase price of the storm recovery property, the servicing agreement also provides that the servicer releases and discharges us and our independent manager, the indenture trustee and each of our respective officers, directors and agents from any and all actions, claims and demands that the servicer, in the capacity of servicer or otherwise, may have against those parties relating to the storm recovery property or the servicer's activities with respect to the storm recovery property, other than actions, claims and demands arising from the willful misconduct, bad faith or gross negligence of the parties.

The servicer will indemnify us, any independent manager, the indenture trustee (in its own capacity and for the benefit of bondholders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such person from and against any and all liabilities, obligations, losses, damages, payments and claims arising from the acceptance and performance of the trusts and the duties under the servicing agreement and in the indenture, except to the extent that any such liability, obligation, loss, damage, payment and claim, and reasonable cost or expense is due to the willful misconduct, bad faith or gross negligence of the indenture trustee.

This indemnification will survive the resignation or removal of the indenture trustee and the termination of the servicing agreement.

#### Evidence as to Compliance
The servicing agreement will provide that the servicer will furnish annually to us, the indenture trustee, the NCUC and the rating agencies, on or before the earlier of March 31 of each year, beginning March 31, 2026 or on the date on which our annual report on Form 10-K relating to the Bonds is required to be filed with the SEC, certificates from a responsible officer of the servicer containing and certifying compliance with specified servicing criteria as required by Item 1122(a) and Item 1123 of the rules of the

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SEC known as Regulation AB promulgated under Subpart 229.1100—Asset-Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1125, as such may be amended from time to time (or any successor or similar item or rule), during the preceding 12 months ended December 31 (or preceding period since the issuance date of the Bonds in the case of the first statement), together with a certificate by an officer of the servicer certifying the statements set forth therein.

The servicing agreement also provides that a firm of independent registered public accountants will furnish annually to us, and provide to the indenture trustee, the NCUC and the rating agencies on or before the earlier of March 31 of each year, beginning March 31, 2026 or on the date on which the annual report on Form 10-K relating to the Bonds is required to be filed with the SEC, an annual accountant's report, which will include any required attestation report that attests to and reports on the servicer's assessment report described in the preceding paragraph, and such attestation shall be in accordance with Rules 1-02(a)(3) and 2-02(g) of Regulation S-X under the Securities Act of 1933, as amended, and the Exchange Act. The report will also indicate that the accounting firm providing the report is independent of the servicer within the meaning of the rules of the Public Company Accounting Oversight Board. The cost of the annual accountant's report will be reimbursable as an operating expense under the indenture and the series supplement.

Copies of the above reports will be filed with the SEC. Please read "Where You Can Find More Information" in this prospectus. You may also obtain copies of the above statements and certificates by sending a written request addressed to the indenture trustee.

The servicer will also be required to deliver to us, the indenture trustee , the NCUC and the rating agencies monthly reports setting forth certain information relating to collections of storm recovery charges received during the preceding calendar month and, shortly before each payment date, a report setting forth the amount of principal and interest payable to bondholders on such date, the aggregate outstanding amount of the Bonds, before and after giving effect to any payment of principal on such payment date, the difference between the principal outstanding on the Bonds and the amounts specified in the related expected sinking fund schedule after giving effect to any such payments and the amounts on deposit in the capital subaccount and excess funds subaccount after giving effect to all transfers and payments to be made on such payment date. In addition, the servicer is required to send copies of each filing or notice evidencing a true-up adjustment to us, the indenture trustee and the rating agencies. The servicer is also required to provide to the rating agencies any non-confidential and non-proprietary information as is reasonably requested by the rating agencies.

#### Matters Regarding the Servicer
The servicing agreement will provide that DEC may not resign from its obligations and duties as servicer thereunder, except when DEC delivers to us, the indenture trustee and NCUC an opinion of external legal counsel to the effect that DEC's performance of its duties under the servicing agreement is no longer permissible under applicable law. No resignation by DEC as servicer will become effective until a successor servicer has been approved by the NCUC and assumed DEC's servicing obligations and duties under the servicing agreement.

The servicing agreement further provides that neither the servicer nor any of its directors, officers, employees, and agents will be liable to us or to any other person or entity, except as provided under the servicing agreement, for taking any action or for refraining from taking any action under the servicing agreement or for good faith errors in judgment. However, neither the servicer nor any of its directors, officers or agents will be protected against any liability that would otherwise be imposed by reason of negligence, recklessness or willful misconduct in the performance of its duties or by reason of reckless disregard of obligations and duties under the servicing agreement. The servicer and any of its directors, officers, employees or agents may rely in good faith on the advice of counsel or on any document submitted by any person or entity respecting any matters under the servicing agreement. The servicer has also acknowledged that the NCUC has the authority to enforce the provisions of the servicing agreement for the benefit of customers. Except as provided in the servicing agreement, the servicer is under no obligation to appear in, prosecute or defend any legal action that is not directly related to one of its duties in the servicing agreement or otherwise related to its indemnification obligations.

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Any entity which becomes the successor by merger, consolidation, division, sale, transfer, lease, management contract or otherwise to all or substantially all of the servicer's electric distribution business may assume all of the rights and obligations of the servicer under the servicing agreement without the execution or filing of any document. The following are conditions to the transfer of the duties and obligations to a successor servicer:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • immediately after the transfer, no representation or warranty made by the servicer in the servicing agreement will have been breached and no servicer default or event which after notice of, lapse of time or both, would become a servicer default, has occurred and is continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer has delivered to us, to the NCUC, to the indenture trustee and the rating agencies an officer's certificate and an opinion of counsel stating that the transfer complies with the servicing agreement and all conditions to the transfer under the servicing agreement have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer has delivered to us, to the indenture trustee, the NCUC and the rating agencies an opinion of counsel stating either that all necessary filings, including those under the Financing Act and the UCC, to fully preserve and protect our interests and liens of the indenture trustee in all of the storm recovery property have been made or that no such filings are required;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer has given prior written notice to the rating agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the servicer has delivered to us, the indenture trustee, the NCUC and the rating agencies, an opinion of counsel stating that for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in material adverse U.S. federal income tax consequences for the bondholders; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any applicable requirements of the intercreditor agreements have been satisfied.

So long as the conditions of any such assumptions are met, then the prior servicer will automatically be released from its obligations under the servicing agreement.

#### Servicer Defaults
Servicer defaults under the servicing agreement will include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any failure by the servicer to remit any amount, including payments arising from the storm recovery charges into the collection account as required under the servicing agreement, which failure continues unremedied for five business days after written notice from us or the indenture trustee is received by the servicer (with a copy of such notice being provided promptly upon receipt by the servicer to the NCUC) or after discovery of the failure by a responsible officer of the servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any failure by the servicer to duly perform its obligations to make storm recovery charge adjustment filings in the time and manner set forth in the servicing agreement, which failure continues unremedied for a period of five business days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any failure by the servicer or, if the servicer is DEC or an affiliate of DEC, by DEC to observe or perform in any material respect any covenants or agreements in the servicing agreement or the other basic documents to which it is a party, which failure materially and adversely affects the rights of bondholders and which failure continues unremedied for 60 days after written notice of this failure has been given to the servicer or, if the servicer is DEC or an affiliate of DEC, by us, the NCUC (with a copy of such notice being provided upon receipt by the servicer to the indenture trustee) or by the indenture trustee or after such failure is discovered by a responsible officer of the servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • any representation or warranty made by the servicer in the servicing agreement or any other basic document proves to have been incorrect in a material respect when made, which has a material adverse effect on the bondholders and which material adverse effect continues unremedied for a period of 60 days after the giving of written notice to the servicer by us or the indenture trustee (with a copy of such notice being provided promptly upon receipt by the Servicer to the NCUC) or after such failure is discovered by a responsible officer of the servicer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • events of bankruptcy, insolvency, receivership or liquidation of the servicer.

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#### Rights Upon a Servicer Default
In the event of a servicer default that remains unremedied, the indenture trustee, at the written direction of the holders of a majority of the outstanding principal amount of the storm recovery bonds or at the written direction of the NCUC, subject to the terms of the intercreditor agreements, by notice then given in writing to the servicer, will terminate all the rights and obligations (other than servicer's indemnity obligation and obligation to continue performing its functions as servicer until a successor servicer is appointed) of the servicer under the servicing agreement and under the intercreditor agreements; provided, however the indenture trustee shall not give a termination notice upon instruction of the NCUC unless the rating agency condition is satisfied. In addition, upon a servicer default, then we and the indenture trustee shall be entitled to apply to the NCUC or any court of competent jurisdiction for sequestration and payment to the indenture trustee of revenues arising with respect to the applicable storm recovery property.

On or after the receipt by the servicer of a notice of termination, all authority and power of the servicer under the servicing agreement, whether with respect to the storm recovery bonds, the storm recovery property, the storm recovery charges or otherwise, shall, upon appointment of a successor servicer under the servicer agreement, without further action, pass to and be vested in such successor servicer and, without limitation, the indenture trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of the notice of termination, whether to complete the transfer of the storm recovery property records and related documents, or otherwise. The predecessor servicer shall cooperate with the successor servicer, the indenture trustee and with us in effecting the termination of the responsibilities and rights of the predecessor servicer under the servicing agreement, including the transfer to the successor servicer for administration by it of all cash amounts that shall at the time be held by the predecessor servicer for remittance, or shall thereafter be received by it with respect to the storm recovery property or the storm recovery charges. As soon as practicable after receipt by the servicer of such notice of termination, the servicer shall deliver the storm recovery property records to the successor servicer. All reasonable costs and expenses (including attorneys' fees and expenses) incurred in connection with transferring the storm recovery property records to the successor servicer and amending the servicing agreement to reflect such succession as servicer pursuant to the servicing agreement shall be paid by the predecessor servicer upon presentation of reasonable documentation of such costs and expenses. Termination of DEC as servicer shall not terminate DEC's rights or obligations under the sale agreement or any other basic document other than the servicing agreement.

#### Waiver of Past Defaults
The indenture trustee, with the written consent of the holders of a majority of the outstanding principal amount of the Bonds may waive in writing any default by the servicer in the performance of its obligations under the servicing agreement and its consequences, except a default in making any required deposits to the collection account in accordance with the servicing agreement. Upon any such waiver of a past default, such default shall cease to exist, and any default of the servicer arising therefrom shall be deemed to have been remedied for every purpose of the servicing agreement. The servicing agreement will provide that no waiver will impair the related bondholders' rights relating to subsequent defaults.

#### Successor Servicer
Upon the receipt of a notice of termination or upon the servicer's resignation or removal in accordance with the terms of the servicing agreement, the predecessor servicer shall continue to perform its functions as servicer and shall be entitled to receive the requisite portion of the servicing fees, until a successor servicer has assumed in writing the obligations of the servicer. In the event of the servicer's removal or resignation, the indenture trustee, at the written direction of the holders of a majority of the principal amount of the outstanding Bonds or of the NCUC, shall appoint a successor servicer with our prior written consent (which consent shall not be unreasonably withheld).

If no successor servicer has been appointed within 30 days after the delivery of the termination notice, the indenture trustee, at the written direction of the holders of not less than a majority of the outstanding amount of the related Bonds, will petition the NCUC or a court of competent jurisdiction for the appointment of, a successor servicer which is permitted to perform the duties of the servicer pursuant to the Financing

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Act, the NCUC regulations, the financing order and the servicing agreement, satisfies criteria specified by the nationally recognized statistical rating agencies rating the Bonds, enters into a servicing agreement with us having substantially the same provisions as the servicing agreement in effect between us and the predecessor servicer and, if applicable, its compensation is approved (or not disapproved) by the NCUC.

If for any reason a third party assumes the role of the servicer under the servicing agreement, the servicing agreement will require the servicer, on an ongoing basis, to cooperate with us, the indenture trustee and the successor servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the successor servicer in performing its obligations under the servicing agreement.

#### Amendment
The servicing agreement may be amended in writing by the servicer and us, if a copy of the amendment is provided by us to each rating agency and the NCUC and if the rating agency condition and NCUC condition have been satisfied, with the prior written consent of the indenture trustee; provided, that such amendment may not adversely affect the interest of any bondholder in any material respect without the consent of the bondholders of a majority of the outstanding principal amount of Bonds.

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#### INTERCREDITOR AGREEMENTS
Under the DEC intercreditor agreement, among DEC, us, the indenture trustee, and the indenture trustee for the 2021 NC Storm Recovery Bonds, (i) the respective holders of the storm recovery bonds have separate ownership interests in their respective storm recovery property and (ii) replacement of the servicers will require the agreement of each of the indenture trustee, the indenture trustee for the 2021 NC Storm Recovery Bonds.

In the sale agreement, DEC has covenanted that, for so long as the Bonds are outstanding, it will not enter into any (i) trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from North Carolina electric distribution customers unless the indenture trustee, the seller and the other parties to such additional arrangement shall have entered into a joinder or amendment to the intercreditor agreements in connection therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude storm recovery property (including storm recovery charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any other affiliate property consisting of charges similar to the storm recovery charges sold pursuant to the sale agreement, payable by customers pursuant to the Financing Act or any similar law, unless the seller and the other parties to such arrangement shall have entered into a joinder or amendment to the intercreditor agreements in connection with any agreement or similar arrangement described in the sale agreement.

In connection with the issuance of the storm recovery bonds, the issuing entity and indenture trustee will execute a joinder to the DEBS intercreditor arrangement among DEC and its affiliates whereby the storm recovery charges will be identified as property of the issuing entity pledged to the indenture trustee. Please refer to "Risk Factors—Servicing Forecasting Risks—If DEC NC Storm Funding II needs to replace DEC as the servicer, DEC NC Storm Funding II may experience difficulties finding and using a replacement servicer".

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#### MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following discussion describes the material U.S. federal income tax consequences to U.S. Holders (as defined below) and Non-U.S. Holders (as defined below) of the purchase, ownership, and disposition of the Series A Bonds acquired in this offering and, insofar as it relates to matters of U.S. federal income tax law and regulations or legal conclusions with respect thereto, constitutes the opinion of DEC's tax counsel, Hunton Andrews Kurth LLP. Except where noted, this discussion only applies to Bonds that are held as capital assets (within the meaning of Section 1221 of the Internal Revenue Code) by holders who purchase the Bonds upon their original issuance at their original issue price. This discussion does not address the tax considerations applicable to subsequent purchasers of Bonds. This discussion does not describe all of the material tax considerations that may be relevant to holders in light of their particular circumstances or to holders subject to special rules, such as certain financial institutions, regulated investment companies, real estate investment trusts, banks, insurance companies, tax-exempt entities, certain former citizens or residents of the United States, dealers in securities, traders in securities that elect to use a mark-to-market method of accounting, S-corporations, partnerships, or other entities or arrangements treated as partnerships for U.S. federal income tax purposes and other pass-through entities (and persons holding the Bonds through a partnership or other pass-through entity), U.S. Holders whose functional currency is not the U.S. dollar, passive foreign investment companies, controlled foreign corporations, and corporations that accumulate earnings to avoid U.S. federal income tax, accrual method taxpayers subject to special tax accounting rules under Section 451(b) of the Internal Revenue Code, or persons holding the Bonds as part of a hedge, straddle, or other integrated transaction. In addition, this discussion does not address the effect of any state, local, foreign, or other tax laws or any U.S. Medicare contribution tax on net investment income, federal estate, gift, alternative minimum or foreign tax considerations. However, by acquiring a Bond, a holder agrees to treat the Bond as a debt of DEC to the extent consistent with applicable state, local, and other tax law unless otherwise required by appropriate taxing authorities. This discussion is based upon the Internal Revenue Code, administrative pronouncements, judicial decisions, and final, temporary, and proposed Treasury regulations, all as in effect on the date hereof, and all of which are subject to change or differing interpretations, possibly with retroactive effect, so as to result in U.S. federal income tax consequences different from those discussed below.

As used in this prospectus, the term "**U.S. Holder**" means a beneficial owner of a Bond that is for U.S. federal income tax purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • an individual citizen or resident of the United States;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a corporation (or other entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • an estate the income of which is subject to U.S. federal income taxation regardless of its source; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • a trust (i) with respect to which a court within the United States is able to exercise primary supervision over its administration and one or more United States persons (as defined under Section 7701(a)(30) of the Internal Revenue Code) have the authority to control all of its substantial decisions, or (ii) that has a valid election in effect under applicable Treasury regulations to be treated as a domestic trust.

The term "**Non-U.S. Holder**" means a beneficial owner of a Bond that is not a U.S. Holder but does not include (i) an entity or arrangement treated as a partnership for U.S. federal income tax purposes, (ii) a former individual citizen of the United States, or (iii) a former resident of the United States.

If an entity or arrangement treated as a partnership for U.S. federal income tax purposes holds Bonds, the tax treatment of such partnership and its partners will generally depend on the status of the partner and the activities of such partnership and its partners. If a holder of Bonds is a partnership or a partner in such a partnership, such holder should consult with its own tax advisors regarding the U.S. federal income tax considerations of the purchase, ownership and disposition of Bonds.

THIS SUMMARY IS NOT INTENDED TO CONSTITUTE A COMPLETE DESCRIPTION OF ALL TAX CONSEQUENCES RELATING TO THE PURCHASE, OWNERSHIP, AND DISPOSITION OF THE BONDS. PROSPECTIVE INVESTORS SHOULD CONSULT WITH THEIR TAX ADVISORS REGARDING THE PARTICULAR TAX CONSEQUENCES TO THEM (INCLUDING THE

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APPLICATION AND EFFECT OF ANY STATE, LOCAL, AND NON-U.S. INCOME AND OTHER TAX LAWS) OF THE PURCHASE, OWNERSHIP AND DISPOSITION OF THE BONDS.

#### Taxation of the Issuing Entity and Characterization of the Bonds
Concurrent with the issuance of the Bonds, Hunton Andrews Kurth LLP, as tax counsel to the issuing entity and DEC, will deliver its opinion that based upon the Internal Revenue Code, the Treasury regulations promulgated thereunder, and Revenue Procedure 2005-62, 2005-2 CB 507 ("**Revenue Procedure 2005-62**"), as modified by Revenue Procedure 2024-15, 2024-12 I.R.B. 717 ("**Revenue Procedure 2024-15**") (as modified, the "**Revenue Procedure**"), for U.S. federal income tax purposes (i) the issuance of the Bonds will be a "qualifying securitization" within the meaning of the Revenue Procedure, (ii) the Bonds will be characterized as obligations of DEC for U.S. federal income tax purposes as expressly set forth in section 6.02 of the Revenue Procedure, (iii) the issuing entity will not be subject to U.S. federal income tax as an entity separate from DEC (the issuing entity's sole member), and (iv) DEC will not be treated as recognizing gross income upon the issuance of the Bonds. By acquiring a Bond, a beneficial owner agrees to treat the Bond as debt of DEC for U.S. federal income tax purposes. This opinion is based on certain representations made by the issuing entity and DEC and on the application of current law to the facts as established by the indenture and other relevant documents and assumes compliance with the indenture and such other documents as in effect on the date of issuance of the Bonds.

#### Tax Consequences to U.S. Holders
 *Interest* 

DEC and the issuing entity expect that the Bonds will not be issued with more than a de minimis amount of original issue discount, or "**OID**", for U.S. federal income tax purposes. Thus, stated interest on the generally will be taxable to a U.S. Holder as ordinary income at the time it is received or accrued in accordance with such U.S. Holder's regular method of accounting for U.S. federal income tax purposes. If, however, the issue price of a tranche of the Bonds is less than the stated principal amount of that tranche of Bond and the difference is equal to or more than a de minimis amount (as set forth in the applicable Treasury regulations), U.S. Holders will be required to include the difference in income as OID as it accrues in accordance with the constant yield method (as set forth in the applicable Treasury regulations). The remainder of this discussion assumes that the Bonds will not be treated as issued with OID.

 *Sale, Exchange, or Retirement of Bonds* 

On a sale, exchange, or retirement of a Bond, a U.S. Holder generally will recognize taxable gain or loss equal to the difference between the amount received (other than any amount received attributable to accrued but unpaid interest on the Bond not previously included in income, which will be taxable as ordinary income) and the U.S. Holder's adjusted tax basis in the Bond. A U.S. Holder's adjusted tax basis in a Bond is the U.S. Holder's cost, subject to adjustments such as reductions in basis for principal payments received previously. Gain or loss will generally be capital gain or loss, and will be long-term capital gain or loss if the Bond was held for more than one year at the time of disposition. Long-term capital gains of non-corporate U.S. Holders may be eligible for reduced rates of taxation. The deductibility of capital losses by both corporate and non-corporate U.S. Holders is subject to limitations.

 *Information Reporting and Backup Withholding* 

In general, information reporting requirements will apply to certain payments of principal and interest on the Bonds and to the proceeds from the sale of the Bonds unless the recipient is an exempt recipient. In addition, backup withholding at the current rate will apply to the payments if a U.S. Holder fails to provide its taxpayer identification number, a certificate of exempt status, or otherwise comply with the applicable requirements of the U.S. backup withholding rules.

Backup withholding is not an additional tax. Any amounts withheld from payments to a U.S. Holder under the backup withholding rules will be allowed as a credit against such U.S. Holder's U.S. federal income tax liability and may entitle the U.S. Holder to a refund, provided that the required information is timely furnished to the IRS. U.S. Holders should consult their own tax advisors regarding the application of

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backup withholding in their particular situation, the availability of an exemption from backup withholding, and the procedure for obtaining such an exemption, if available.

#### Tax Consequences to Non-U.S. Holders
 *Interest* 

Subject to the discussion below concerning backup withholding and FATCA, a Non-U.S. Holder generally will not be subject to U.S. federal income and withholding tax on interest received in respect of the Bonds, provided that such interest is not effectively connected with such Non-U.S. Holder's conduct of a U.S. trade or business and such Non-U.S. Holder (i) does not own, actually or constructively, 10% or more of the total combined voting power of DEC, (ii) is not a controlled foreign corporation for U.S. federal income tax purposes directly or indirectly related to DEC within the meaning of Section 881(c)(3)(C) of the Internal Revenue Code, (iii) is not a bank whose receipt of interest on the Bonds is described in Section 881(C)(3)(A) of the Internal Revenue Code, and (iv) satisfies certain certification requirements under penalties of perjury (generally through the provision of a properly completed and executed IRS Form W-8BEN or IRS Form W-8BEN-E, as applicable).

A Non-U.S. Holder that does not qualify for the exemption from withholding described above (the "**Portfolio Interest Exemption**"), generally will be subject to U.S. federal withholding tax at a 30% rate on payments of interest on the Bonds unless (i) such interest is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (and, if an applicable tax treaty so requires, is attributable to the conduct of a trade or business through a permanent establishment or fixed base in the United States) and the Non-U.S. Holder provides the applicable paying agent an IRS Form W-8ECI (or appropriate substitute form) or (ii) the Non-U.S. Holder provides a properly completed IRS Form W-8BEN or W-8BEN-E (or successor form), as applicable, establishing an exemption from or reduction in withholding under an applicable tax treaty.

If interest or other income received with respect to Bonds is effectively connected with a United States trade or business conducted by a Non-U.S. Holder (and, if an applicable tax treaty so requires, is attributable to the conduct of a trade or business through a permanent establishment or fixed base in the United States), the Non-U.S. Holder generally will be subject to U.S. federal income tax on such interest or other income on a net income basis at the regular graduated rates applicable to U.S. Holders. In addition, if the Non-U.S. Holder is a foreign corporation, it may be subject to a branch profits tax equal to 30% of its effectively connected earnings and profits for the taxable year, subject to certain adjustments, unless reduced or eliminated by an applicable tax treaty.

 *Sale, Exchange, or Retirement of Bonds* 

Subject to the backup withholding discussions below, a Non-U.S. Holder generally will not be subject to U.S. federal income or withholding tax on gain realized on the sale or exchange of the Bonds (other than gain that represents accrued but unpaid interest not previously included in income, which will be subject to the rules described above regarding payments of interest), unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the Non-U.S. Holder is an individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the gain is effectively connected with the conduct by the Non-U.S. Holder of a trade or business in the United States (and, if required by an applicable income tax treaty, is attributable to a permanent establishment or fixed base maintained by the Non-U.S. Holder in the United States).

Except to the extent that an applicable income tax treaty otherwise provides, generally a Non-U.S. Holder will be taxed on a net income basis at the same graduated rates applicable to U.S. Holders with respect to gain that is effectively connected with the Non-U.S. Holder's conduct of a U.S. trade or business. A corporate Non-U.S. Holder may also, under certain circumstances, be subject to the branch profits tax described above. A Non-U.S. Holder who is both an individual present in the United States for 183 days or more in the taxable year and meets certain other conditions will be subject to U.S. federal income tax at a rate of 30% (or at a reduced rate under an applicable income tax treaty) on the amount by which capital gains from U.S. sources (including gains from the sale or other disposition of the Bonds) exceed capital losses

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allocable to U.S. sources. To claim the benefit of an applicable income tax treaty, a Non-U.S. Holder may be required to file an income tax return and disclose its position under the U.S. Treasury regulations concerning treaty-based return positions.

#### Information Reporting and Backup Withholding
Generally, the amount of interest paid to a Non-U.S. Holder and the amount of tax, if any, withheld with respect to those payments must be reported to the IRS and to the Non-U.S. Holder. Copies of the information returns reporting such interest payments and any withholding may also be made available to the tax authorities in the country in which the Non-U.S. Holder resides under the provisions of an applicable tax treaty.

In general, a Non-U.S. Holder will not be subject to backup withholding with respect to payments of interest on the Bonds that are made to the Non-U.S. Holder, provided that the Non-U.S. Holder has provided certification that such Non-U.S. Holder is a Non-U.S. Holder, and the payor does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person (as defined under Section 7701(a)(30) of the Internal Revenue Code).

Information reporting and, depending on the circumstances, backup withholding will apply to the proceeds of a sale or other disposition (including a retirement or redemption) of Bonds within the United States or conducted through certain U.S.-related financial intermediaries unless the Non-U.S. Holder certifies to the payor under penalties of perjury that it is a Non-U.S. Holder and the payor does not have actual knowledge or reason to know that the Non-U.S. Holder is a United States person (as defined under Section 7701(a)(3) of the Internal Revenue Code), or the Non-U.S. Holder otherwise establishes an exemption.

Backup withholding is not an additional tax. Any amounts withheld from a payment to a Non-U.S. Holder under the backup withholding rules will be allowed as a credit against such Non-U.S. Holder's U.S. federal income tax liability and may entitle such Non-U.S. Holder to a refund, provided that the required information is timely furnished to the IRS. Non-U.S. Holders should consult their tax advisors regarding the application of information reporting and backup withholding in their particular situations, the availability of an exemption from backup withholding, and the procedure for obtaining such an exemption, if available.

#### The Foreign Account Tax Compliance Act (FATCA)
Pursuant to Sections 1471 through 1474 of the Internal Revenue Code (commonly referred to as "FATCA"), Treasury regulations thereunder, and administrative guidance, issuers of certain debt instruments and their agents, as applicable, are required to withhold 30% of the amount of any "withholdable payments" with respect to such instruments paid to (i) a foreign financial institution (whether such foreign financial institution is the beneficial owner or an intermediary) unless such institution enters into an agreement with the United States government to collect and report to the United States government, on an annual basis, information with respect to its U.S. account holders and meets certain other specified requirements (or, in certain circumstances, complies with similar reporting requirements of the non-United States government in the jurisdiction in which it is organized or located under an intergovernmental agreement between such non-United States government and the United States government) or (ii) a non-financial foreign entity (whether such non-financial foreign entity is the beneficial owner or an intermediary) unless such entity certifies that it does not have any "substantial U.S. owners" or provides certain information regarding the entity's "substantial U.S. owners" and such entity meets certain other specified requirements. FATCA generally will apply to all payments otherwise subject to FATCA withholding without regard to whether the beneficial owner of the payment is a United States person (as defined under Section 7701(a)(30) of the Internal Revenue Code) or would otherwise be entitled to an exemption from imposition of withholding tax pursuant to an applicable tax treaty with the United States or United States domestic law.

Non-U.S. Holders should consult their own tax advisors regarding the possible implications of FATCA and whether FATCA may be relevant to such Non-U.S. Holder's acquisition, ownership, and disposition of the Bonds.

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#### STATE AND OTHER TAX CONSEQUENCES
In addition to the U.S. federal income tax consequences described in "Material U.S. Federal Income Tax Consequences" in this prospectus, potential investors should consider the state and local tax consequences of the acquisition, ownership, and disposition of the storm recovery bonds offered by this prospectus. State tax law may differ substantially from the corresponding federal tax law, and the discussion above does not purport to describe any aspect of the tax laws of any state or other jurisdiction. Therefore, prospective investors should consult their tax advisors about the various tax consequences of investments in the Bonds offered by this prospectus.

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#### ERISA CONSIDERATIONS
 *This discussion is based on current provisions of ERISA and the Internal Revenue Code, existing and currently proposed regulations under ERISA and the Internal Revenue Code, the legislative history of ERISA and the Internal Revenue Code, existing administrative rulings of the United States Department of Labor (the "**DOL**") and reported judicial decisions. No assurance can be given that legislative, judicial, or administrative changes will not affect the accuracy of any statements herein with respect to transactions entered into or contemplated prior to the effective date of such changes. This discussion does not purport to deal with all aspects of ERISA or the Internal Revenue Code or, to the extent not preempted, any state laws.* 

#### General
ERISA and the Internal Revenue Code impose certain requirements on employee benefit plans subject to ERISA and/or Section 4975 of the Internal Revenue Code and on persons or entities that are fiduciaries with respect to such plans. For purposes of this discussion, "**Plans**" refers to employee benefit plans (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, plans (as defined in Section 4975(e)(1) of the Internal Revenue Code) subject to Section 4975 of the Internal Revenue Code (which includes individual retirement accounts and annuities and Keogh plans) and entities, including collective investment funds and insurance company general or separate accounts, that may be deemed to hold the assets of the foregoing by virtue of such employee benefit plan's or plan's investment in such entities. A fiduciary of a Plan is any person or entity that in connection with the assets of the Plan:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • exercises discretionary authority or control over the management or disposition of plan assets; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • provides investment advice for a fee or other compensation.

Some plans, such as governmental plans (as defined in Section 3(32) of ERISA, if no election has been made under Section 410(d) of the Code, church plans as defined in Section 3(33) of ERISA and plans maintained outside the United States primarily for the benefit of persons substantially all of whom are non-resident aliens as described in Section 4(b)(4) of ERISA, and the fiduciaries of those plans, may not be subject to the fiduciary responsibility provisions of ERISA or the prohibited transaction rules of ERISA or Section 4975 of the Internal Revenue Code; provided, however, that they may be subject to the provisions of federal, state, local or other laws or regulations that are substantially similar to Title I of ERISA or Section 4975 of the Internal Revenue Code (collectively "Similar Law"). Accordingly, assets of these plans may be invested in the Bonds without regard to the ERISA considerations described below, provided that a governmental or church plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code is subject to the prohibited transaction rules in Section 503 of the Internal Revenue Code. Accordingly, any fiduciary of such a plan must determine whether the acquisition, holding and disposition of the Bonds will not constitute or result in a violation of Similar Law.

ERISA imposes certain general fiduciary requirements on fiduciaries of Plans that are subject to Title I of ERISA, including:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • investment prudence and diversification; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the investment of the assets of such Plan in accordance with the documents governing such Plan.

Section 406 of ERISA and Section 4975 of the Internal Revenue Code also prohibit a broad range of transactions involving the assets of a Plan and persons or entities that have certain specified relationships to the Plan, referred to as "parties in interest" (as defined under ERISA) or "disqualified persons" (as defined under the Code), unless a statutory or administrative exemption is available. For purposes of this discussion, "**parties in interest"** include parties in interest under ERISA and disqualified persons under the Internal Revenue Code. The types of transactions between a Plan and a party in interest that are prohibited include, but are not limited to, the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • sales, exchanges or leases of property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • loans or other extensions of credit; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the furnishing of goods or services.

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Certain persons or entities that participate in a prohibited transaction may be subject to an excise tax under Section 4975 of the Internal Revenue Code or a penalty imposed under Section 502(i) of ERISA, unless a statutory, administrative or individual exemption is available. In addition, the persons or entities involved in the prohibited transaction may have to cancel the transaction and the fiduciary of the Plan that engaged in or allowed the Plan to engage in, the prohibited transaction may have to pay an amount to the Plan for any losses realized by the Plan or profits realized by these persons or entities. In addition, individual retirement accounts involved in the prohibited transaction (if the prohibited transaction involves the owner of the account or his or her beneficiary) may be disqualified, which would result in adverse tax consequences to the owner of the account.

#### Regulation of Assets Included in a Plan
A fiduciary's investment of the assets of a Plan in the Bonds may cause our assets to be deemed assets of such Plan. The DOL regulations at 29 CFR Section 2510.3-101 as modified by Section 3(42) of ERISA, (collectively, the "**plan asset regulations**"), describe what constitutes "plan assets" of a Plan with respect to the Plan's investment in an entity, including us, for purposes of applying the general fiduciary responsibility provisions of ERISA and the prohibited transaction provisions of ERISA or Section 4975 of the Code. Under the plan asset regulations, generally, when a Plan acquires an "equity interest" in another entity (such as us), the Plan's assets, for purposes of the fiduciary provisions of ERISA and the prohibited transaction provisions of ERISA or Section 4975 of the Code, include both the equity interest and an undivided interest in the entity's underlying assets (here, our assets) unless an exception applies. Under the plan asset regulations, an entity's assets (here, our assets) generally would not be considered to be "plan assets" if, among other things:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the equity interests acquired by a Plan are publicly offered securities (i.e., the equity interests are part of a class of securities that is widely held by 100 or more investors independent of us and each other, are "freely transferable" (as determined under the plan asset regulations) and are either registered under certain provisions of the federal securities laws or sold to the Plan as part of a public offering under certain conditions);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • such entity is an "operating company" (i.e., it is primarily engaged in the production or sale of a product or service other than the investment of capital either directly or through a majority-owned subsidiary or subsidiaries); or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • investment in such entity by "benefit plan investors" (which includes Plans) is not "significant," which is defined under the plan asset regulations to mean that immediately after the most recent acquisition of any equity interest in such entity, less than 25% of the value of each class of equity interests in such entity (disregarding interests held by persons (other than benefit plan investors) with discretionary authority or control over the assets of such entity who provide investment advice for a fee (direct or indirect) with respect to such assets, and any affiliates thereof) is held by benefit plan investors.

An equity interest is defined in the plan asset regulations as an interest in an entity other than an instrument that is treated as indebtedness under applicable local law and that has no substantial equity features. Although there is no authority directly on point and assuming that the Bonds are treated as indebtedness under applicable local law, it is anticipated that the Bonds should not be treated as an equity interest in us for purposes of the plan asset regulations.

If the Bonds were deemed to be equity interests in us and none of the exceptions contained in the plan asset regulations were applicable, then our assets would be considered to be assets of any Plans that acquire the Bonds. The extent to which the Bonds are held by Plans will not be monitored. If our assets were deemed to constitute "plan assets" pursuant to the plan asset regulations, transactions we might enter into, or may have entered into in the ordinary course of business, might constitute non-exempt prohibited transactions under ERISA and or Section 4975 of the Internal Revenue Code.

In addition and without regard to whether our assets would deemed to be "plan assets" of an investing Plan, the acquisition or holding of the Bonds by or on behalf of, or using assets of, a Plan could give rise to a prohibited transaction if we or the indenture trustee, DEC, any other servicer, Duke Energy, any underwriter or certain of their affiliates has, or acquires, a relationship to an investing Plan. Before acquiring

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any Bonds by or on behalf of, or with plan assets of, a Plan, you should consider and consult with counsel as to whether the acquisition, holding or disposition of the Bonds might result in a prohibited transaction under ERISA or Section 4975 of the Internal Revenue Code and, if so, whether any prohibited transaction exemption might apply to the purchase, holding or disposition of the Bonds.

#### Prohibited Transaction Exemptions
If you are a fiduciary of a Plan or any other person or entity proposing to acquire the Bonds on behalf of, or using plan assets of, a Plan, before acquiring any Bonds, you should consider the availability of one of the DOL's prohibited transaction class exemptions, referred to as **PTCEs**, or one of the statutory exemptions provided by ERISA or Section 4975 of the Internal Revenue Code, which include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • PTCE 75-1, relating to transactions effected by certain broker-dealers, reporting dealers and banks;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • PTCE 84-14, relating to transactions effected by a "qualified professional asset manager";

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • PTCE 90-1, relating to transactions involving insurance company separate accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • PTCE 91-38, relating to transactions involving bank collective investment funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • PTCE 95-60, relating to transactions involving insurance company general accounts;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • PTCE 96-23, relating to transactions effected by an "in-house asset manager"; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • the statutory service provider exemption provided under Section 408(b)(17) of ERISA and Section 4975(d)(20) of the Internal Revenue Code, relating to certain transactions between plans and certain parties in interest that are not fiduciaries or their affiliates with respect to the transaction.

We cannot provide any assurance that any of these class exemptions or statutory exemptions will apply with respect to any particular investment in the Bonds by, on behalf of or using plan assets of, a Plan or, even if it were deemed to apply, that any exemption would apply to all transactions that may occur in connection with the investment. For example, even if one of these class exemptions or statutory exemptions were deemed to apply, Bonds may not be purchased with assets of any Plan if we or the indenture trustee, DEC, any other servicer, Duke Energy Corporation, any underwriter or any of their affiliates:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • has investment discretion over the assets of the Plan used to purchase the Bonds; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; • has authority or responsibility to give, or regularly gives, investment advice regarding the assets of the Plan used to purchase the Bonds for a fee under an agreement or understanding that the advice will serve as a primary basis for investment decisions for the assets of the Plan, and will be based on the particular investment needs of the Plan.

#### Representation
Each purchaser or transferee of a bond will be deemed to have represented and warranted by virtue of its acquisition of a bond on each day from and including the date of its acquisition of the Bonds through and including the date of disposition of any such bond that either (i) it is not and is not acting on behalf of, or using plan assets of, (a) a Plan or any governmental, church or non-U.S. plan that is subject to Similar Law or (ii) its acquisition, holding and disposition of the bond, in the case of a Plan, will not constitute or result in a non-exempt prohibited transaction in violation of Section 406 of ERISA or Section 4975 the Internal Revenue Code or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, will not result in or constitute a violation of Similar Law.

#### Consultation with Counsel
The foregoing discussion is general in nature and is not intended to be all inclusive nor should it be construed as legal advice. If you are a fiduciary or other person which proposes to acquire the Bonds on behalf of, or with plan assets of a Plan or a governmental, church or non-U.S. plan subject to Similar Law, you should consider your general fiduciary obligations under ERISA or the Internal Revenue Code and, if applicable, any Similar Law considerations and you should consult with your legal counsel as to, in the case of a Plan, the potential applicability of the plan asset regulation and other provisions of ERISA, the prohibited transaction provisions of ERISA and Section 4975 of the Internal Revenue Code to any such

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investment and the availability of any prohibited transaction exemption in connection with any investment or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, the applicability of any Similar Law.

None of we, DEC, Duke Energy Corporation nor any initial purchaser, or any of our or their respective affiliates, is making an investment recommendation or providing investment advice in connection with the decision to acquire the Bonds in this offering, and none of them is acting as a fiduciary to such Plan in connection with such Plan's acquisition of any Bonds.

 **The sale of Bonds to a Plan or any governmental, church or non-U.S. plan subject to Similar Law is in no respect a representation by us, the indenture trustee, DEC, any other servicer, Duke Energy Corporation, any underwriter or any of our or their affiliates that this investment meets all relevant legal requirements for investments by such Plans or plans generally or any particular Plan or plan or that this investment is appropriate for such Plans or plans generally or any particular Plan or plan.** 

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#### BANKRUPTCY AND CREDITORS' RIGHTS ISSUES

#### Challenge to True Sale Treatment
DEC will represent and warrant that the transfer of the storm recovery property in accordance with the sale agreement constitutes a true and valid sale and assignment of the storm recovery property by DEC to us. It will be a condition of closing for the sale of the storm recovery property pursuant to the sale agreement that DEC will take the appropriate actions under the Financing Act, including filing a notice of transfer of an interest in the storm recovery property, to perfect this sale. The Financing Act provides that the sale, conveyance, assignment, or other transfer of storm recovery property by an electric utility to an assignee that the parties have in the governing documentation expressly stated to be a sale or other absolute transfer is an absolute transfer and true sale of, and not a pledge of or secured transaction relating to, the transferor's right, title, and interest in, to, and under the storm recovery property, other than for federal and state income tax purposes. We and DEC will treat such a transaction as a sale under applicable law. However, we expect that Bonds will be reflected as debt on DEC's consolidated financial statements. In addition, we anticipate that the Bonds will be treated as debt of DEC for U.S. federal income tax purposes. Please read "Material U.S. Federal Income Tax Consequences". In the event of a bankruptcy of a party to a sale agreement, if a party in interest in the bankruptcy were to take the position that the transfer of the storm recovery property to us pursuant to that sale agreement was a financing transaction and not a true sale under applicable creditors' rights principles, there can be no assurance that a court would not adopt this position. Even if a court did not ultimately recharacterize the transaction as a financing transaction, the mere commencement of a bankruptcy of DEC and the attendant possible uncertainty surrounding the treatment of the transaction could result in delays in payments on the Bonds.

In that regard, we note that the bankruptcy court in In re LTV Steel Company, Inc., et al., 274 B.R. 278 (Bankr. N. D. Oh. 2001), issued an interim order that observed that a debtor, LTV Steel Company, Inc., which had previously entered into financing arrangements with respect both to its inventory and its accounts receivable, may have "at least some equitable interest in the inventory and receivables, and that this interest is property of the Debtor's estate. … sufficient to support the entry of" an interim order permitting the debtor to use proceeds of the property sold in the financing. 274 B.R. at 285. The court based its decision in large part on its view of the equities of the case.

LTV Steel Company, Inc. and the investors subsequently settled their dispute over the terms of the interim order and the bankruptcy court entered a final order in which the parties admitted and the court found that the pre-petition transactions constituted true sales. The court did not otherwise overrule its earlier ruling. The LTV Steel Company, Inc. memorandum opinion serves as an example of the pervasive equity powers of bankruptcy courts and the importance that such courts may ascribe to the goal of reorganization, particularly where the assets sold are integral to the ongoing operation of the debtor's business.

Even if creditors did not challenge the sale of storm recovery property as a true sale, a bankruptcy filing by DEC could trigger a bankruptcy filing by us with similar negative consequences for bondholders. In a more recent bankruptcy case, In re General Growth Properties, Inc., 409 B.R. 43, 54 (Bankr. S.D.N.Y. 2009), General Growth Properties, Inc. filed for bankruptcy together with many of its direct and indirect subsidiaries, including many subsidiaries that were organized as special purpose vehicles. The Southern District of New York bankruptcy court upheld the validity of the filings of these special purpose subsidiaries and allowed the subsidiaries, over the objections of their creditors, to use the lenders' cash collateral to make loans to the parent for general corporate purposes. The creditors received adequate protection in the form of current interest payments and replacement liens to mitigate any diminution in value resulting from the use of the cash collateral, but the opinion serves as a reminder that bankruptcy courts may subordinate legal rights of creditors to the interests of helping debtors reorganize.

We and DEC have attempted to mitigate the impact of a possible recharacterization of a sale of storm recovery property as a financing transaction under applicable creditors' rights principles. The sale agreement will provide that if the transfer of the applicable storm recovery property is thereafter recharacterized by a court as a financing transaction and not a true sale, the transfer by DEC will be deemed to have granted to us on our behalf and on behalf of the indenture trustee a first priority security interest in all of DEC's right, title and interest in, to and under the storm recovery property and all proceeds thereof. In addition, the sale agreement will require the filing of a notice of security interest in the storm recovery property and the

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proceeds thereof as collateral in accordance with the Financing Act. As a result of this filing, we would, in the event of a recharacterization, be a secured creditor of DEC and entitled to recover against the collateral or its value. This does not, however, eliminate the risk of payment delays or reductions and other adverse effects caused by a DEC bankruptcy. Further, if, for any reason, a storm recovery property notice is not filed under the Financing Act and we fail to perfect our interest in the storm recovery property, and the transfer is thereafter deemed not to constitute a true sale, we would be an unsecured creditor of DEC.

The Financing Act provides that, except as provided in the Financing Act, the creation, granting, perfection and enforcement of liens and security interests in storm recovery property are governed by the Financing Act and not by the North Carolina Uniform Commercial Code. Under the Financing Act, a valid and enforceable lien and security interest in storm recovery property may be created only upon the later of (i) the issuance of a financing order, (ii) the execution and delivery of a security agreement with a holder of storm recovery bonds or a trustee or agent for the holder or with a financing party in connection with the issuance of storm recovery bonds, or (iii) the receipt of value for storm recovery bonds. Upon perfection through the filing of a financing statement to the North Carolina Secretary of State, the security interest shall be a continuously perfected lien in the storm recovery property, with priority in the order of filing and take precedence over any subsequent judicial or other lien creditor. None of this, however, mitigates the risk of payment delays and other adverse effects caused by a DEC bankruptcy.

If, for any reason, a financing statement is not filed under the Financing Act and we fail to perfect our interest in the storm recovery property sold pursuant to a sale agreement as required by the Financing Act, and the transfer is thereafter deemed not to constitute a true sale, we would be an unsecured creditor of DEC. Notwithstanding any failure on our part to perfect our interest in the storm recovery property, under the Financing Act and the financing order, a statutory lien on the storm recovery property and the proceeds thereof arises by operation of law automatically without any action on the part of DEC, us or any other person. This statutory lien secures all obligations, then existing or thereafter arising, to the holders and the indenture trustee of the holders of the storm recovery bonds issued pursuant to the financing order. Under the Financing Act, this statutory lien is valid, perfected and enforceable against the owner of the storm recovery property and all third parties upon the effectiveness of the financing order without any further public notice (although protective filings (including the filing by us of financing statements as described above) is permitted under the Financing Act). If DEC were to become a debtor in a bankruptcy case and a bankruptcy court determined that we were an unsecured creditor, there can be no assurance that the court would be made aware of the statutory lien described above or, if the court was aware of the statutory lien arising under the Financing Act and the financing order, that the court would determine that the indenture trustee and the holders of the storm recovery bonds have a first priority statutory lien or are secured creditors of DEC.

#### Substantive Consolidation of DEC NC Storm Funding II and DEC
If DEC were to become a debtor in a bankruptcy case, a party in interest might attempt to substantively consolidate our assets and liabilities with those of DEC. We and DEC have taken steps to attempt to minimize this risk. Please read "The Issuing Entity" in this prospectus. However, no assurance can be given that if DEC were to become a debtor in a bankruptcy case, a court would not order that our assets and liabilities be substantively consolidated with those of DEC. Substantive consolidation would result in payment of the claims of the beneficial owners of the Bonds to be subject to substantial delay and to adjustment in timing and amount under a plan of reorganization in the bankruptcy case.

#### Status of Storm Recovery Property as Present Property
DEC will represent in the sale agreement, and the Financing Act provides, that the storm recovery property sold pursuant to such sale agreement constitutes a present property right on the date that it is first transferred to us in connection with the issuance of the Bonds. Nevertheless, no assurance can be given that, in the event of a bankruptcy of DEC a court would not rule that the applicable storm recovery property comes into existence only as customers use electricity.

If a court were to accept the argument that the applicable storm recovery property comes into existence only as customers use electricity, no assurance can be given that a security interest in favor of the bondholders would attach to the storm recovery charges in respect of electricity consumed after the commencement of

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the bankruptcy case or that the storm recovery property has been sold to us. If it were determined that the storm recovery property had not been sold to us, and the security interest in favor of the bondholders did not attach to the applicable storm recovery charges in respect of electricity consumed after the commencement of the bankruptcy case, then we would have an unsecured claim against DEC. If so, there would be delays and/or reductions in payments on the Bonds. Whether or not a court determined that storm recovery property had been sold to us pursuant to a sale agreement, no assurances can be given that a court would not rule that any storm recovery charges relating to electricity consumed after the commencement of the bankruptcy could not be transferred to us or the indenture trustee.

In addition, in the event of a bankruptcy of DEC, a party in interest in the bankruptcy could assert that we should pay, or that we should be charged for, a portion of DEC's costs associated with the distribution of the electricity, usage of which gave rise to the storm recovery charge receipts used to make payments on the Bonds.

Regardless of whether DEC is the debtor in a bankruptcy case, if a court were to accept the argument that storm recovery property sold pursuant to the sale agreement comes into existence only as customers use electricity, a tax or government lien or other nonconsensual lien on property of DEC arising before that storm recovery property came into existence could have priority over our interest in that storm recovery property. Adjustments to the storm recovery charges may be available to mitigate this exposure, although there may be delays in implementing these adjustments.

#### Estimation of Claims; Challenges to Indemnity Claims
If DEC were to become a debtor in a bankruptcy case, claims, including indemnity claims, by us or the indenture trustee against DEC, as seller, under the sale agreement and the other documents executed in connection therewith would be unsecured claims and would be subject to being discharged in the bankruptcy case. In addition, a party in interest in the bankruptcy may request that the bankruptcy court estimate any contingent claims that we or the indenture trustee have against DEC. That party may then take the position that these claims should be estimated at zero or at a low amount because the contingency giving rise to these claims is unlikely to occur. If a court were to hold that the indemnity provisions were unenforceable, we or the indenture trustee, as applicable, would be left with a claim for actual damages against DEC based on breach of contract principles. The actual amount of these damages would be subject to estimation and/or calculation by the court.

No assurances can be given as to the result of any of the above-described actions or claims. Furthermore, no assurance can be given as to what percentage of their claims, if any, unsecured creditors would receive in any bankruptcy proceeding involving DEC.

#### Enforcement of Rights by the Indenture Trustee
Upon an event of default under the indenture or the series supplement, the indenture trustee may enforce the security interest in the storm recovery property sold pursuant to the sale agreement in accordance with the terms of the indenture and the series supplement. In this capacity, an interested party such as the indenture trustee or the NCUC is permitted to request that a North Carolina court order the sequestration and payment to bondholders of all revenues arising with respect to the storm recovery property. There can be no assurance, however, that a judge would issue this order after a seller bankruptcy in light of the automatic stay provisions of Section 362 of the Bankruptcy Code. In that event, the indenture trustee may under the indenture seek an order from the bankruptcy court lifting the automatic stay with respect to this action by the NCUC or a court and an order requiring an accounting and segregation of the revenues arising from the storm recovery property sold pursuant to the sale agreement. There can be no assurance that a court would grant either order.

#### Bankruptcy of the Servicer
The servicer is entitled to commingle the storm recovery charges that it receives with its own funds until each date on which the servicer is required to remit funds to the indenture trustee as specified in the servicing agreement. The Financing Act provides that the priority of a lien and security interest created under the Financing Act is not impaired by the commingling of funds arising from storm recovery charges with

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other funds. In the event of a bankruptcy of the servicer, a party in interest in the bankruptcy might assert, and a court might rule, that the storm recovery charges commingled by the servicer with its own funds and held by the servicer, prior to and as of the date of bankruptcy were property of the servicer as of that date, and are therefore property of the servicer's bankruptcy estate, rather than our property. If the court so rules, then the court would likely rule that the indenture trustee has only a general unsecured claim against the servicer for the amount of commingled storm recovery charges held as of that date and could not recover the commingled storm recovery charges held as of the date of the bankruptcy.

However, if the court were to rule in our favor on the ownership of the commingled storm recovery charges, the automatic stay arising upon the bankruptcy of the servicer could delay the indenture trustee from receiving the commingled storm recovery charges held by the servicer as of the date of the bankruptcy until the court grants relief from the stay. A court ruling on any request for relief from the stay could be delayed pending the court's resolution of whether the commingled storm recovery charges are our property or are property of the servicer, including resolution of any tracing of proceeds issues.

The servicing agreement will provide that the indenture trustee, as our assignee, together with the other persons and entities specified therein, may vote to appoint a successor servicer that satisfies the rating agency condition. The servicing agreement will also provide that the indenture trustee, together with the other persons and entities specified therein, may petition the NCUC or a court of competent jurisdiction to appoint a successor servicer that meets this criterion. However, the automatic stay in effect during a servicer bankruptcy might delay or prevent a successor servicer's replacement of the servicer. Even if a successor servicer may be appointed and may replace the servicer, a successor may be difficult to obtain and may not be capable of performing all of the duties that DEC as servicer was capable of performing. Furthermore, should the servicer enter into bankruptcy, it may be permitted to stop acting as servicer.

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#### USE OF PROCEEDS
Proceeds will be used to pay expenses of issuance and to purchase the storm recovery property from DEC and to pay financing costs relating to the Bonds. In accordance with the financing order, DEC will use the proceeds it receives from the sale of the storm recovery property to (i) reimburse itself for previously incurred storm recovery costs relating to Hurricanes Zeta, Helene, Debby, and Ian and Winter Storm Izzy, including the retirement of related debt, including our term loan that matures on November 1, 2026 and commercial paper. The annual interest rate on the term loan is 5.4%.

The costs of issuance of the Bonds and other initial costs of the transaction, net of underwriting discounts and commissions of $, are expected to be approximately $.

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#### PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)
Subject to the terms and conditions in the underwriting agreement among DEC NC Storm Funding II, DEC and the underwriters, for whom RBC Capital Markets, LLC and Barclays Capital Inc. are acting as representatives, we have agreed to sell to the underwriters, and the underwriters have severally agreed to purchase, the principal amount of the Bonds listed opposite each underwriter's name below:

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| | | |
|:---|:---|:---|
| **Underwriter**  | **Tranche**  | &nbsp;&nbsp; **Total**  |
| RBC Capital Markets, LLC  |  |  |
| Barclays Capital Inc.  |  |  |
| &nbsp;&nbsp;&nbsp; Total  | $— | $— |

---

Under the underwriting agreement, the underwriters will take and pay for all of the Bonds offered, if any are taken. If an underwriter defaults, the underwriting agreement provides that the purchase commitments of the non-defaulting underwriters may be increased or the underwriting agreement may be terminated.

#### The Underwriters' Sales Price for the Bonds
The Bonds sold by the underwriters to the public will be initially offered at the prices to the public set forth on the cover of this prospectus. The underwriters propose initially to offer the Bonds to dealers at such prices, less a selling concession not to exceed the percentage listed below for such tranche. The underwriters may allow, and dealers may reallow, a discount not to exceed the percentage listed below for such tranche.

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| | | |
|:---|:---|:---|
| | **Selling <br> Concession**  | **Reallowance <br> Discount**  |
| Tranche % |  |  |
| Tranche % |  |  |
| Tranche % |  |  |

---

After the initial public offering, the public offering prices, selling concessions and reallowance discounts may change.

#### No Assurance as to Resale Price or Resale Liquidity for the Bonds
The Bonds are a new issue of securities with no established trading market. They will not be listed on any securities exchange. The underwriters have advised the depositor and us that they intend to make a market in the Bonds, but they are not obligated to do so and may discontinue market making at any time without notice. The depositor cannot assure you that a liquid trading market will develop for the Bonds.

#### Various Types of Underwriter Transactions That May Affect the Price of the Bonds
The underwriters may engage in overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids with respect to the Bonds in accordance with Regulation M under the Securities Exchange Act of 1934, as amended, or the **Exchange Act**. Overallotment transactions involve syndicate sales in excess of the offering size, which create a syndicate short position. Stabilizing transactions are bids to purchase the Bonds, which are permitted, so long as the stabilizing bids do not exceed a specific maximum price. Syndicate covering transactions involve purchases of the Bonds in the open market after the distribution has been completed in order to cover syndicate short positions. Penalty bids permit the underwriters to reclaim a selling concession from a syndicate member when the Bonds originally sold by the syndicate member are purchased in a syndicate covering transaction. These overallotment transactions, stabilizing transactions, syndicate covering transactions and penalty bids may cause the prices of the Bonds to be higher than they would otherwise be. None of us, DEC, the indenture trustee, our managers or any of the underwriters represents that the underwriters will engage in any of these transactions or that these

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transactions, if commenced, will not be discontinued without notice at any time. Furthermore, the recently adopted Rule 192 under the Securities Act prohibits DEC and the underwriters from entering into transactions that would involve or result in any material conflict of interest with respect to any investor. Neither we nor DEC have entered into any arrangement with any underwriter under which an underwriter may purchase additional Bonds in connection with this offering.

Certain of the underwriters and their affiliates have in the past provided, and may in the future from time to time provide, investment banking and general financing and banking services to Duke Energy Corporation, DEC and its affiliates for which they have in the past received, and in the future may receive, customary fees.

We and DEC have agreed to indemnify the underwriters against some liabilities, including liabilities under the Securities Act of 1933, as amended, or to contribute to payments the underwriters may be required to make in respect of those liabilities.

The underwriters are offering the Bonds, subject to prior sale, when, as and if issued to and accepted by them, subject to approval of legal matters, including the validity of the Bonds and other conditions contained in the underwriting agreement, such as receipt of ratings confirmations, officers' certificates and legal opinions. The underwriters reserve the right to withdraw, cancel or modify offers to the public and to reject offers in whole or in part.

The Bonds are expected to be delivered against payment for the Bonds on or about the date specified in the last paragraph of the cover page of this prospectus, which will be the business day following the date of pricing of the Bonds. Since trades in the secondary market generally settle in one business day, purchasers who wish to trade Bonds on the date of pricing or the succeeding business days will be required, by virtue of the fact that the Bonds initially will settle in T+ , to specify alternative settlement arrangements to prevent a failed settlement.

#### Conflicts of Interest
Certain of the underwriters or their affiliates are lenders or may hold a portion of the short-term debt that DEC intends to repay from the proceeds it will receive from the sale of the storm recovery property. In such event, it is possible that one or more of the underwriters or their affiliates could receive more than 5% of the net proceeds of this offering, and in that case such underwriter could be deemed to have a conflict of interest under FINRA Rule 5121. In the event of any such conflict of interest, such underwriter would be required to conduct the distribution of Bonds in accordance with FINRA Rule 5121. If the distribution is conducted in accordance with FINRA Rule 5121, such underwriter would not be permitted to sell to an account over which it exercises discretionary authority without first receiving specific written approval from the account holder.

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#### AFFILIATIONS AND CERTAIN RELATIONSHIPS
We are a wholly-owned subsidiary of Duke Energy Carolinas, LLC. Duke Energy Carolinas, LLC is an indirect wholly-owned operating subsidiary of Duke Energy Corporation. Each of the sponsor, the depositor, RBC Capital Markets, LLC and Barclays Capital Inc. may maintain other banking relationships in the ordinary course with U.S. Bank Trust Company, National Association.

Affiliates of the indenture trustee act as lender for, and provide other banking, investment banking and other financial services to DEC, Duke Energy Corporation and their respective affiliates.

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#### LEGAL PROCEEDINGS
From time to time, the issuing entity and DEC may be subject to various legal proceedings and claims that arise in the course of their business activities. Although the results of litigation and claims cannot be predicted with certainty, as of the date of this prospectus, the issuing entity and DEC do not believe they are party to any claim or litigation, the outcome of which, if determined adversely to the issuing entity or DEC, would individually or in the aggregate be reasonably expected to be material to bondholders. Regardless of the outcome, litigation can have an adverse impact on the issuing entity and DEC because of defense and settlement costs, diversion of management resources and other factors.

There are no legal or governmental proceedings pending against the issuing entity, the sponsor, seller, indenture trustee, or servicer, or of which any property of the foregoing is subject, that is material to the holders of the storm recovery bonds. Please read, however, "The Indenture Trustee" in this prospectus for a discussion of certain legal proceedings involving certain affiliates of the indenture trustee.

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#### RATINGS
DEC expects that the Bonds will receive credit ratings from at least two rating agencies. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or withdrawal at any time by the assigning rating agency. Each rating should be evaluated independently of any other rating. No person or entity is obligated to maintain the rating on any Bonds and, accordingly, DEC can give no assurance that the ratings assigned to any tranche of the Bonds upon initial issuance will not be lowered or withdrawn by a rating agency at any time thereafter. If a rating of any tranche of Bonds is lowered or withdrawn, the liquidity of this tranche of the Bonds may be adversely affected. In general, ratings address credit risk and do not represent any assessment of any particular rate of principal payments on the Bonds other than the payment in full of such tranche of the Bonds by the final maturity date or tranche final maturity date, as well as the timely payment of interest.

Under Rule 17g-5 under the Exchange Act, NRSROs providing the servicer with the requisite certification will have access to all information posted on a website by the servicer for the purpose of determining the initial rating and monitoring the rating after the issuance date in respect of the Bonds. As a result, an NRSRO other than the hired NRSROs may issue unsolicited ratings on the Bonds, which may be lower, and could be significantly lower, than the ratings assigned by the hired NRSRO. The unsolicited ratings may be issued prior to, or after, the issuance date in respect of the Bonds.

Issuance of any unsolicited rating will not affect the issuance of the Bonds. Issuance of an unsolicited rating lower than the ratings assigned by the hired NRSRO on the Bonds might adversely affect the value of the Bonds and, for regulated entities, could affect the status of the Bonds as a legal investment or the capital treatment of the Bonds. Investors in the Bonds should consult with their legal counsel regarding the effect of the issuance of a rating by a non-hired NRSRO that is lower than the rating of a hired NRSRO.

A portion of the fees paid by DEC to a rating agency that is hired to assign a rating on the Bonds is contingent upon the issuance of the Bonds. In addition to the fees paid by DEC to a rating agency at closing, DEC will pay a fee to the rating agency for ongoing surveillance for so long as the Bonds are outstanding. However, no rating agency is under any obligation to continue to monitor or provide a rating on the Bonds.

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#### INVESTMENT COMPANY ACT OF 1940 AND VOLCKER RULE MATTERS
The issuing entity will be relying on an exclusion or exemption from the definition of "investment company" under the Investment Company Act of 1940, as amended, or the "**1940 Act**", contained in Rule 3a-7 under the 1940 Act, although there may be additional exclusions or exemptions available to the issuing entity. As a result of such exclusion, the issuing entity will not be subject to regulation as an "investment company" under the 1940 Act.

In addition, the issuing entity is being structured so as not to constitute a "covered fund" for purposes of the Volcker Rule, or the "**Volcker Rule**", under the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the "**Dodd-Frank Act**". As part of the Dodd-Frank Act, federal law prohibits a "banking entity"—which is broadly defined to include banks, bank holding companies and affiliates thereof-from engaging in proprietary trading or holding ownership interests in certain private funds. The definition of "covered fund" in the regulations adopted to implement the Volcker Rule includes (generally) any entity that would be an investment company under the 1940 Act but for the exemption provided under Section 3(c)(1) or 3(c)(7) thereunder. Because the Issuing Entity will rely on Rule 3a-7 of the 1940 Act, it will not be considered a "covered fund" within the meaning of the Volcker Rule regulations.

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#### RISK RETENTION
This offering of Bonds is a public utility securitization exempt from the risk retention requirements imposed by Section 15G of the Exchange Act due to the exemption provided in Rule 19(b)(8) of Regulation RR.

For information regarding the requirements of the EU Securitization Regulation as to risk retention and other matters, please read "Risk Factors—Other Risks Associated with the Purchase of the Bonds—Regulatory provisions affecting certain investors could adversely affect the liquidity of the Bonds" in this prospectus.

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#### WHERE YOU CAN FIND MORE INFORMATION
This prospectus is part of a registration statement the depositor has filed with the SEC relating to the Bonds. This prospectus describes the material terms of some of the documents that have been filed or will file as exhibits to the registration statement. However, this prospectus does not contain all of the information contained in the registration statement and the exhibits. Any statements contained in this prospectus concerning the provisions of any document filed as an exhibit to the registration statement or otherwise filed with the SEC are not necessarily complete. Each statement concerning those provisions is qualified in its entirety by reference to the respective exhibit. Information filed with the SEC can be inspected at the SEC's Internet site located at http://www.sec.gov. You may also read and copy the registration statement, the exhibits and any other documents filed with the SEC at the SEC's Public Reference Room located at 100 F Street, N.E., Washington, D.C. 20549 on official business days between the hours of 10:00 am and 3:00 pm. You may obtain further information regarding the operation of the SEC's Public Reference Room by calling the SEC at 1-800-SEC-0330. You may also obtain a copy of filings with the SEC at no cost, by writing to or telephoning at the following address:

Duke Energy Carolinas NC Storm Funding II LLC

525 South Tryon Street

Charlotte, North Carolina 28202

800-488-3853

The SEC Securities Act file numbers are 333- and 333- -01.

We will also file with the SEC all the periodic and current reports that are required to be filed under the Exchange Act and the rules, regulations or orders of the SEC thereunder.

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#### INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" into this prospectus information we or the depositor file with the SEC. This means disclosure of important information may be made by referring you to the documents containing the information. The information incorporated by reference is considered to be part of this prospectus, unless such information is updated or superseded by the information that we or the depositor file subsequently that is incorporated by reference into this prospectus.

To the extent that we are required by law to file such reports and information with the SEC under the Exchange Act, we will file annual and current reports and other information with the SEC. We are incorporating by reference any future filings made by us or the sponsor, but solely in its capacity as our sponsor with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act prior to the termination of the offering, excluding any information that is furnished to and not filed with the SEC. These reports will be filed under our own name as issuing entity.

We are incorporating into this prospectus any future distribution report on Form 10-D, current report on Form 8-K or any amendment to any such report which we or DEC, solely in its capacity as our depositor, make with the SEC until the offering of the Bonds in completed. These reports will be filed under our own name as issuing entity. In addition, these reports will be posted on a website associated with us or our affiliates, currently located at www.duke-energy.com. These reports will be filed under our own name as issuing entity. Any statement contained in this prospectus or in a document incorporated or deemed to be incorporated by reference in this prospectus will be deemed to be modified or superseded for purposes of this prospectus to the extent that a statement contained in this prospectus or in any separately filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes that statement. Any statement so modified or superseded will not be deemed, except as so modified or superseded, to constitute part of this prospectus.

Under the indenture, we may voluntarily suspend or terminate filing obligations with the SEC, to the extent it becomes permitted by applicable law.

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#### LEGAL MATTERS
Certain legal matters relating to the Bonds, including certain U.S. federal income tax matters, will be passed on by Hunton Andrews Kurth LLP, counsel to DEC and DEC NC Storm Funding II. Certain other legal matters relating to the Bonds will be passed on by McGuireWoods LLP, North Carolina counsel to DEC, by Troutman Pepper Hamilton Sanders LLP, special Delaware counsel to DEC NC Storm Funding II, and by Norton Rose Fulbright US LLP, counsel to the underwriters.

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#### GLOSSARY
As used in this prospectus the terms below have the following meanings:

"**2021 NC Storm Recovery Bonds**" means the $237.21 million aggregate principal amount of senior secured storm recovery bonds issued in November 2021 by Duke Energy Carolinas NC Storm Funding LLC pursuant to Section 62-172, North Carolina General Statutes.

"**Administration agreement**" means the administration agreement to be entered into on the issuance date between Duke Energy Carolinas NC Storm Funding II LLC and DEC.

"**Administrator**" means DEC, and each successor or assignee of DEC (in the same capacity) pursuant to the administration agreement.

"**ADO**" means average balance of days outstanding.

"**Bankruptcy Code**" means Title 11 of the United States Code, as amended.

"**Basic documents**" means, the indenture (including the series supplement), our certificate of formation, our limited liability company agreement, the sale agreement, the servicing agreement, the bill of sale, the administration agreement, the intercreditor agreements, the joinder to the DEBS Intercreditor Agreement, the letter of representations executed by us in favor of DTC, any underwriting agreement or purchase or distribution agreement, and all documents and certificates contemplated thereby or delivered in connection therewith.

"**Bondholder**" means a registered holder of the Bonds.

"**Bonds**" means the Series A Senior Secured Storm Recovery Bonds offered pursuant to this prospectus.

"**Business day**" means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina; Charlotte, North Carolina; or New York, New York, are, or DTC or the corporate trust office of the indenture trustee, is, authorized or obligated by law, regulation or executive order to remain closed.

"**Capital subaccount**" means the capital subaccount named in the indenture.

"**Clearstream**" means Clearstream Banking, société anonyme, Luxembourg.

"**Collection account**" means the segregated trust account relating to the Bonds designated the collection account for that series and held by the indenture trustee under the indenture.

"**Customer**" means any North Carolina retail customer (individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service, or both, from DEC or its successors or assignees under NCUC-approved rate schedules or under special contracts, even if the customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in North Carolina.

"**DEBS Intercreditor Agreement**" means the Amended and Restated Intercreditor Agreement, dated December 20, 2013, by and among the Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Duke Energy Progress, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress NC Storm Funding LLC, Duke Energy Progress SC Storm Funding LLC, the Indenture Trustee, the Bank of New York Mellon Trust Company, N.A. and DEC, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"**DEC**" means Duke Energy Carolinas, LLC.

"**DEC Intercreditor Agreement**" means the intercreditor agreement, to be entered into on the issuance date by and among the Bank of New York Mellon Trust Company, N.A. (as trustee of Duke Energy Carolinas NC Storm Funding LLC), the Indenture Trustee (as trustee of the issuing entity), Duke Energy Carolinas NC Storm Funding LLC, the issuing entity and DEC as the same may be amended, restated, supplemented or otherwise modified from time to time.

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"**DEC NC Storm Funding II**" means Duke Energy Carolinas NC Storm Funding II LLC, the issuing entity.

"**Definitive Bonds**" means Bonds issued in fully registered, certificated form.

"**Depositor**" means Duke Energy Carolinas, LLC.

"**Direct participants**" means banks, brokers, dealers, trust companies and other entities that deposit with DTC.

"**DOL**" means the U.S. Department of Labor.

"**DTC**" means The Depository Trust Company, New York, New York, and its nominee holder, Cede & Co.

"**DTCC**" means The Depository Trust & Clearing Corporation.

"**Eligible institution**" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (a) the corporate trust department of the indenture trustee or an affiliate thereof, so long as the indenture trustee or such affiliate have (i) either a short-term deposit or issuer rating from Moody's of at least "P-1" or a long-term unsecured debt or issuer rating from Moody's of at least "A2", and (ii) a short-term deposit or issuer rating from S&P of at least "A-1", or a long-term unsecured debt or issuer rating from S&P of at least "A"; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank) (i) that has either (A) a long-term unsecured debt or issuer rating of "AA-" or higher by S&P and "A2" or higher by Moody's, or (B) a short-term (bank deposit) or issuer rating of "A-1" or higher by S&P and "P-1" or higher by Moody's, and (ii) whose deposits are insured by the Federal Deposit Insurance Corporation;

provided, however, that if an eligible institution then being utilized for any purposes under the indenture or the series supplement no longer meets the definition of eligible institution, then the issuing entity shall replace such eligible institution within sixty (60) days of such eligible institution no longer meeting the definition of eligible institution.

"**Eligible investments**" means:

Funds in the collection account may be invested at the direction of the servicer only in such investments as meet the criteria described below and which mature on or before the business day immediately preceding the next payment date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (1)

direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (2)

demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of or bankers' acceptances issued by, any depository institution (including the indenture trustee or any of its affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or State banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit or contractual commitment, rated at least "A-1" and "P-1" or their equivalents by each of S&P and Moody's, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (3)

commercial paper (including commercial paper of the indenture trustee, acting in its commercial capacity, and other commercial paper of DEC or any of its affiliates), which, at the time of purchase is rated at least "A-1" or "P-1" or their equivalents by each of S&P and Moody's or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (4)

investments in money market funds which have a rating in the highest investment category granted

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thereby (including funds for which the indenture trustee or any of its affiliates is investment manager or advisor) from Moody's and S&P;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (5)

repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or certain of its agencies or instrumentalities, entered into with eligible institutions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (6)

repurchase obligations with respect to any security or whole loan entered into with an eligible institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; a.

a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a "broker/dealer"), the unsecured short-term debt obligations of which are rated at least "P-1" by Moody's and "A-1+" by S&P at the time of entering into such repurchase obligation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; b.

an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least "P-1" by Moody's and "A-1+" by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (7)

any other investment permitted by each rating agency.

Notwithstanding the foregoing: (1) no securities or investments which mature in 30 days or more will be eligible investments unless the issuing entity thereof has either a short-term unsecured debt rating of at least "P-1" from Moody's or a long-term unsecured debt rating of at least "A1" from Moody's; (2) no securities or investments described in clauses (2) through (4) above which have maturities of more than 30 days but less than or equal to 3 months will be eligible investments unless the issuing entity thereof has a long-term unsecured debt rating of at least "A1" from Moody's and a short-term unsecured debt rating of at least "P-1" from Moody's; (3) no securities or investments described in clauses (2) through (4) above which have maturities of more than 3 months will be eligible investments unless the issuing entity thereof has a long-term unsecured debt rating of at least "A1" from Moody's and a short-term unsecured debt rating of at least "P-1" from Moody's; (4) no securities or investments described in clauses (2) through (4) above which have a maturity of 60 days or less will be eligible investments unless such securities have a rating from S&P of at least "A-1"; and (5) no securities or investments described in clauses (2) through (4) above which have a maturity of 365 days or less will be eligible investments unless such securities have a rating from S&P of at least "AA-", "A-1+" or "AAAm".

"**ERISA**" means the Employee Retirement Income Security Act of 1974, as amended.

"**Euroclear Operator**" or "**Euroclear**" means Euroclear Bank S.A./N.V.

"**Euroclear participants**" means participants of the Euroclear System.

"**Events of Default**" means those events of defaults under the indenture.

"**Excess funds subaccount**" means that excess funds subaccount created pursuant to the indenture.

"**Exchange Act**" means the Securities Exchange Act of 1934, as amended.

"**FATCA**" means the legislation enacted in March 2010 and related Treasury guidance that, when applicable, imposes U.S. federal withholding tax at a rate of 30% on certain payments on, and the gross proceeds from the sale or other disposition of, obligations that produce U.S. source income to certain foreign entities.

"**FERC**" means the Federal Energy Regulatory Commission.

"**Financing Act**" means Chapter 62, Section 172, North Carolina General Statutes, as amended.

"**Financing order**" means, with respect to the Bonds, the irrevocable financing order, dated June 18, 2025, issued by the NCUC to DEC.

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"**GWh**" means gigawatt-hour.

"**Hired NRSROs**" means the NRSROs hired by the seller.

"**Indenture**" means the indenture to be entered into between DEC NC Storm Funding II, the indenture trustee, the securities intermediary and the account bank providing for the Bonds, and any other series of storm recovery bonds that might be issued pursuant to the financing order, as the same may be amended and supplemented from time to time.

"**Indenture trustee**" means U.S. Bank Trust Company, National Association, or any successor indenture trustee under the indenture.

"**Indirect participants**" means banks, brokers, dealers, trust companies and other entities that clear through or maintain a custodial relationship with a DTC participant either directly or indirectly.

"**Intercreditor Agreements**" means the DEBS Intercreditor Agreement and the DEC Intercreditor Agreement.

"**Internal Revenue Code**" means the Internal Revenue Code of 1986, as amended.

"**Issuing entity**" means Duke Energy Carolinas NC Storm Funding II LLC.

"**kWh**" means kilowatt-hour.

"**Moody's**" means Moody's Investors Service, Inc.

"**Nonbypassable**" refers to the right of the servicer to collect the storm recovery charges from all existing and future customers of DEC.

"**NCUC**" means the North Carolina Utilities Commission.

"**NCUC condition**" means, with respect to amendments, modifications, or supplements to, or waivers of defaults under, any basic document, obtaining from the NCUC its required consent or acquiescence for the proposed action.

"**NCUC regulations**" means any regulations, including temporary regulations, promulgated by the NCUC pursuant to North Carolina law.

"**NRSRO**" means a nationally recognized statistical rating organization.

"**Operating expenses**" means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any manager, the servicing fee, the administration fee, legal and accounting fees, Rating Agency fees, and related fees (i.e. website provider fees) and any franchise, license or other taxes owed by the Issuer, including on investment income in the Collection Account.

"**Participant**" means an organization that participates in DTC.

"**Parties in interest**" means "parties in interest" under ERISA and "disqualified persons" under the Code.

"**Payment date**" means the date or dates on which interest and principal are to be payable on any tranche of Bonds.

"**Periodic Payment Requirement**" means, for each payment date, the scheduled principal of and interest on the Bonds and other financing costs and other required amounts and charges to be accrued in connection with the Bonds.

"**Plan asset regulations**" means the DOL regulations at 29 CFR 2510.3-101, as modified by Section 3(42) of ERISA.

"**Plan**" means an employee benefit plan (as defined in Section 3(3) of ERISA) that is subject to Title I of ERISA, a plan (as defined in Section 4975(e)(1) of the Internal Revenue Code) that is subject to

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Section 4975 of the Internal Revenue Code (which includes an individual retirement account and annuity and a Keogh plan) and an entity. including a collective investment fund and an insurance company general or separate account, that may be deemed to hold the assets of the foregoing by virtue of such employee benefit plan's or plan's investment in such entity other.

"**PSCSC**" means the Public Service Commission of South Carolina.

"**PTCE**" means prohibited transaction class exemption.

"**Public Staff**" means the Public Staff of the NCUC, an independent agency established in N.C. Gen. Stat. § 62-15 et seq., that represents the interests of the using and consuming public in matters pending before the NCUC.

"**Rating agency**" means any of Moody's and S&P.

"**Rating agency condition**" means, with respect to any action, at least ten business days' prior written notification to each rating agency of such action, and written confirmation from each of S&P and Moody's to the servicer, the indenture trustee and us that such action will not result in a suspension, reduction or withdrawal of the then current rating by such rating agency of any tranche of the Bonds issued by us; provided, that, if within such ten business day period, any rating agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such rating agency is reviewing and considering the notification, then (i) we shall be required to confirm that such rating agency has received the rating agency condition request, and if it has, promptly request the related rating agency condition confirmation and (ii) if the rating agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five business days following such second request, the applicable rating agency condition requirement shall not be deemed to apply to such rating agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a rating agency's right to review or consent).

"**Record date**" means one Business Day prior to the applicable Payment Date.

"**Regulation AB**" means the rules of the SEC promulgated under Subpart 229.1100—Asset-Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1125, as such may be amended from time to time."

"**Required capital level**" means the amount required to be funded in the capital account for the Bonds, which will equal 0.50% of the initial principal amount of the Bonds issued.

"**Return on invested capital**" means, for any payment date with respect to any calculation period, the sum of (i) rate of return, payable to DEC, on its capital contribution equal to the rate of interest payable on the longest maturing bond plus (ii) any return on invested capital not paid on any prior payment date.

"**S&P**" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business.

"**Sale agreement**" means the purchase and sale agreement to be entered into on the issuance date between DEC NC Storm Funding II and DEC pursuant to which DEC will sell and we will buy the storm recovery property securing the Bonds.

"**Scheduled final payment date**" means, with respect to tranche of Bonds, each payment date on which principal for such tranche is to be paid in accordance with the expected sinking fund schedule for such tranche.

"**SEC**" means the U.S. Securities and Exchange Commission.

"**Securities Act**" means the Securities Act of 1933, as amended.

"**Securities intermediary**" means U.S. Bank National Association or any successor securities intermediary under the indenture.

"**Securitizable Balance**" means the sum of approximately $558.88 million, representing the storm recovery costs, adjusted to include the final amount of carrying costs through the issuance date plus up-front financing costs.

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"**Seller**" means DEC, as the seller of the storm recovery property, and each successor of DEC (in the same capacity) pursuant to the sale agreement.

"**Series supplement**" means that series supplement to the indenture to be entered into on the issue date between DEC NC Storm Funding II and the indenture trustee to the indenture to be entered into on a future date between us and the indenture trustee.

"**Servicer**" means DEC, as the servicer of the storm recovery property, and each successor or assignee of DEC (in the same capacity) pursuant to the servicing agreement.

"**Servicer business day**" means any day other than a Saturday, a Sunday or a day on which banking institutions in Raleigh, North Carolina, Charlotte, North Carolina or New York, New York or the corporate trustee office of the indenture trustee is authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.

"**Servicing agreement**" means the servicing agreement to be entered into on the issue date between DEC NC Storm Funding II and DEC, as the same may be amended and supplemented from time to time, pursuant to which DEC undertakes to service the storm recovery property.

"**Similar Law**" means, collectively, provisions under any federal, state, local, non-U.S. or other laws or regulations that are substantially similar to Section 4975 of the Code or Title I of ERISA.

"**Special payment date**" means the later of the date on which any special payment is confirmed to be received by the indenture trustee, or the date the special payment is scheduled to be delivered to the indenture trustee.

"**Special payment**" means any payment received by the indenture trustee following a payment default on the Bonds.

"**State pledge**" means the pledge of the State of North Carolina under the Financing Act in which the State of North Carolina pledges to and agrees with the bondholders, any assignee and any financing parties that the State and its agencies, including the NCUC, will not (i) alter the provisions of the Financing Act that make the storm recovery charges imposed by the financing order irrevocable, binding, and nonbypassable, (ii) take or permit any action that impairs or would impair the value of storm recovery property, the security for the storm recovery bonds or revises the storm recovery costs, (iii) impair the rights and remedies of the holders, assignees, and other financing parties or (iv) except as part of the true-up mechanism, reduce, alter or impair storm recovery charges that are imposed, collected and remitted for the benefit of the bondholders and other financing parties, until all principal, interest, premium, financing costs and other fees, expenses, or changes incurred, and any contracts to be performed, in connection with the storm recovery bonds have been paid or performed in full.

"**Storms**" means Hurricanes Zeta, Helene, Debby, and Ian and Winter Storm Izzy.

"**Storm recovery bonds**" means, unless the context requires otherwise, the storm recovery bonds offered pursuant to this prospectus.

"**Storm recovery bond collateral**" means (a) the storm recovery property created under and pursuant to the financing order and the Financing Act, and transferred by the seller to us pursuant to the sale agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive the storm recovery charges, the right to obtain periodic adjustments to the storm recovery charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the financing order), (b) all storm recovery charges related to the storm recovery property, (c) the sale agreement and the bill of sale executed in connection therewith and all property and interests in property transferred under the sale agreement and the bill of sale with respect to the storm recovery property and the Bonds, (d) the servicing agreement, the administration agreement, the intercreditor agreements and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing storm recovery property and the Bonds, (e) the collection account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the servicer to file for and obtain periodic

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adjustments to the storm recovery charges in accordance with section 62-172(b)(3)b.6. and section 62-172(b)(3)d. of the Financing Act and the financing order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute storm recovery property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing.

"**Storm recovery charge**" means special, irrevocable nonbypassable charges to be paid by all existing or future customers, and authorized by the financing order to recover the storm recovery costs specified in the financing order.

"**Storm recovery costs**" means (i) the deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the NCUC to be prudently incurred in Docket No. E-7, Sub 1325 plus (ii) carrying costs through the projected issuances date of the Bonds, calculated at a rate authorized by the NCUC, (iii) plus up-front Financing Costs as defined in the Financing Act.

"**Storm recovery property**" means the storm recovery property as defined in the Financing Act and the financing order, and that is sold by the seller to us under the sale agreement.

"**Tranche**" means each weighted average life designation for the Bonds.

"**Treasury regulations**" means proposed or issued regulations promulgated from time to time under the Internal Revenue Code.

"**True-Up Mechanism**" means the mechanism required by the financing order whereby storm recovery charges are reviewed and adjusted at least semi-annually or more frequently as necessary and permitted by the financing order. The rates at which storm recovery charges are billed to customers will be adjusted to correct any overcollections or undercollections from prior periods.

"**Trust Indenture Act**" means the Trust Indenture Act of 1939, as amended.

"**UCC**" means, unless the context otherwise requires, the Uniform Commercial Code, as in effect in the relevant jurisdiction, as amended from time to time.

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### $ SERIES A SENIOR SECURED STORM RECOVERY BONDS

### DUKE ENERGY CAROLINAS, LLC

#### Depositor, Sponsor and Initial Servicer

### DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC

#### Issuing Entity

#### PROSPECTUS

#### Joint Book-Running Managers

### RBC Capital Markets

### Barclays
Through and including (the 90th day after the date of this prospectus), all dealers effecting transactions in these securities, whether or not participating in this offering, may be required to deliver a prospectus. This is in addition to a dealer's obligation to deliver a prospectus when acting as an underwriter and when offering an unsold allotment or subscription.

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#### PART II

#### Information Not Required in Prospectus

#### Item 12. Other Expenses of Issuance and Distribution
The following table sets forth the various expenses expected to be incurred by the registrant in connection with the issuance and distribution of the securities being registered by this prospectus, other than underwriting discounts and commissions. All amounts are estimated except the Securities and Exchange Commission registration fee.

---

| | |
|:---|:---|
| Securities and Exchange Commission registration fee  | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;\* |
| Printing expenses  | \* |
| Trustee fees and expenses  | \* |
| Legal fees and expenses  | \* |
| Accounting fees and expenses  | \* |
| Rating Agencies' fees and expenses  | \* |
| Structuring agent fees and expenses  | \* |
| Miscellaneous fees and expenses  | \* |
| &nbsp;&nbsp;&nbsp; Total  | $\* |

---

\*

To be filed by amendment.

#### Item 13. Indemnification of Directors and Officers

#### DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC
Section 18-108 of the Delaware Limited Liability Company Act provides that subject to such standards and restrictions, if any, as are set forth in the limited liability company agreement of a limited liability company, a limited liability company may, and shall have the power to, indemnify and hold harmless any member or manager or other person from and against any and all claims and demands whatsoever. Under the limited liability company agreement of DEC NC Storm Funding II, the issuing entity will indemnify its managers to the fullest extent permitted by law against any liability incurred with respect to their services as managers under the issuing entity's limited liability company agreement, except for liabilities arising from their own fraud, gross negligence or willful misconduct or, in the case of an independent manager, their bad faith or willful misconduct.

#### DUKE ENERGY CAROLINAS, LLC
Part 3 of Article 3 of the North Carolina Limited Liability Company Act and the Limited Liability Company Operating Agreement of Duke Energy Carolinas ("DEC") permit or require indemnification of its directors and officers in a variety of circumstances, which may include liabilities under the Securities Act. In addition, DEC maintains insurance on behalf of directors, officers, employees or agents, which may cover liabilities under the Securities Act.

The Limited Liability Company Operating Agreement of DEC provides that any person who is or was serving as a member, director, officer, employee or agent of DEC or who, at the request of DEC, is or was serving as a director, manager, officer, employee or agent of another corporation, limited liability company, partnership, joint venture, trust or other enterprise or as a trustee or administrator under an employee benefit plan, shall be indemnified by DEC, to the fullest extent permitted by law, against (a) litigation expenses, including costs, expenses and reasonable attorneys' fees incurred by any such person in connection with any threatened, pending or completed action, suit or proceedings, whether civil, criminal, administrative or investigative, whether formal or informal, and whether or not brought by or on behalf of DEC, arising out of such person's status as such or such person's activities in any of the foregoing capacities, (b) liability, including payments made by such person in satisfaction of any judgment, money decree, fine (including an

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excise tax assessed with respect to an employee benefit plan), penalty or settlement for which such person may have become liable in any such action, suit or proceeding, (c) payments made and personal liabilities reasonably incurred in the authorized conduct of the business of DEC or for the preservation of its business and its property and (d) reasonable costs, expenses and attorneys' fees incurred by such person in connection with the enforcement of the indemnification rights provided in the agreement. The agreement further provides that any person who is or was serving in any of the foregoing capacities for or on behalf of DEC shall be conclusively deemed to be doing or to have done so in reliance upon, and as consideration for, such indemnification rights. The agreement also states that the rights of indemnification described above (which shall be deemed to be a contract between any such person and DEC enforceable on the part of such person notwithstanding any subsequent amendment or repeal of the agreement) shall inure to the benefit of the successors, estates or legal representatives of any such person and shall not be exclusive of any other rights to which such person may be entitled apart from the agreement, by contract, resolution or otherwise.

#### Item 14. Exhibits
List of Exhibits

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| | |
|:---|:---|
| **EXHIBIT <br> NO.**  | **DESCRIPTION OF EXHIBIT**  |
| &nbsp;&nbsp;&nbsp; 1.1 | Form of Underwriting Agreement\* |
| &nbsp;&nbsp;&nbsp; 3.1 | [Certificate of Formation of Duke Energy Carolinas NC Storm Funding II LLC](tm2521130d2_ex3-1.htm)  |
| &nbsp;&nbsp;&nbsp; 3.2 | [Form of Amended and Restated Limited Liability Company Agreement of Duke Energy Carolinas NC Storm Funding II LLC](tm2521130d2_ex3-2.htm)  |
| &nbsp;&nbsp;&nbsp; 4.1 | [Form of Indenture between Duke Energy Carolinas NC Storm Funding LLC and the Indenture Trustee (including forms of the storm recovery bonds)](tm2521130d2_ex4-1.htm)  |
| &nbsp;&nbsp;&nbsp; 5.1 | Opinion of Hunton Andrews Kurth LLP with respect to legality\* |
| &nbsp;&nbsp;&nbsp; 8.1 | Opinion of Hunton Andrews Kurth LLP with respect to federal tax matters\* |
| &nbsp;&nbsp; 10.1 | [Form of Storm Recovery Property Servicing Agreement between Duke Energy Carolinas NC Storm Funding II LLC and Duke Energy Carolinas, LLC, as Servicer](tm2521130d2_ex10-1.htm)  |
| &nbsp;&nbsp; 10.2 | [Form of Storm Recovery Property Purchase and Sale Agreement between Duke Energy Carolinas NC Storm Funding II LLC and Duke Energy Carolinas, LLC, as Seller](tm2521130d2_ex10-2.htm)  |
| &nbsp;&nbsp; 10.3 | [Form of Administration Agreement between Duke Energy Carolinas NC Storm Funding II LLC and Duke Energy Carolinas, LLC, as Administrator](tm2521130d2_ex10-3.htm)  |
| &nbsp;&nbsp; 10.4 | Form of Intercreditor Agreement, by and among Duke Energy Carolinas, LLC, Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Carolinas NC Storm Funding II LLC, The Bank Of New York Mellon Trust Company, National Association (as trustee for Duke Energy Carolinas NC Storm Funding LLC) and U.S. Bank Trust Company, National Association (as trustee for Duke Energy Carolinas NC Storm Funding II LLC)\* |
| &nbsp;&nbsp; 10.5 | Form of Joinder Agreement to the Amended and Restated Intercreditor Agreement, dated December 20, 2013, between Duke Energy Carolinas NC Storm Funding II LLC and U.S. Bank Trust Company, National Association\* |
| &nbsp;&nbsp; 21.1 | [List of Subsidiaries](tm2521130d2_ex21-1.htm)  |
| &nbsp;&nbsp; 23.1 | Consent of Hunton Andrews Kurth LLP (included as part of its opinions filed as Exhibit 5.1 and 8.1)\* |
| &nbsp;&nbsp; 24.1 | [Power of Attorney of Duke Energy Carolinas, LLC (included on the signature pages to this Registration Statement)](#tSIGN)  |
| &nbsp;&nbsp; 25.1 | [Form of T-1 Statement of Eligibility under the Trust Indenture Act of 1939 of U.S. Bank Trust Company, National Association](tm2521130d2_ex25-1.htm)  |
| &nbsp;&nbsp; 99.1 | [Financing Order](tm2521130d2_ex99-1.htm)  |
| &nbsp;&nbsp; 99.2 | Form of Opinion of Hunton Andrews Kurth LLP with respect to U.S. and North Carolina constitutional matters\* |

---

------

[**TABLE OF CONTENTS**](#TOC2)

---

| | |
|:---|:---|
| **EXHIBIT <br> NO.**  | **DESCRIPTION OF EXHIBIT**  |
| &nbsp;&nbsp; 99.3 | [Consent of Manager Nominee](tm2521130d2_ex99-3.htm)  |
| 107.1 | [Calculation of Filing Fee Tables](tm2521130d2_ex-filingfees.htm)  |

---

\*

To be filed by amendment.

#### Item 15. Undertakings
(a) The undersigned registrant hereby undertakes that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)

For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act of 1933 shall be deemed to be part of this registration statement as of the time it was declared effective.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)

For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(b) As to incorporation by reference:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (i)

For purposes of determining any liability under the Securities Act of 1933, each filing of the issuing entity's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; (ii)

For the purpose of determining any liability under the Securities Act of 1933, each filing of the annual report pursuant to section 13(a) or section 15(d) of the Securities Exchange Act of 1934 of a third party that is incorporated by reference in the registration statement in accordance with Item 1100(c)(1) of Regulation AB (17 CFR 229.1100(c)(1)) shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

(c) As to indemnification:

Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, each registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by a registrant of expenses incurred or paid by a director, officer or controlling person of such registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, each registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue.

(d) As to qualification of trust indentures:

The undersigned registrants hereby undertake to file an application for the purpose of determining the eligibility of the indenture trustee to act under Subsection (a) of Section 310 of the Trust Indenture Act in accordance with the rules and regulations prescribed by the Commission under Section 305(b)(2) of the Act.

------

[**TABLE OF CONTENTS**](#TOC)

#### SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form SF-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on the 23rd day of July, 2025.

DUKE ENERGY CAROLINAS, LLC

By:

/s/ Harry K. Sideris

Name: Harry K. Sideris

Title: Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Signatures**  | **Title**  | **Date**  |
| /s/ Harry K. Sideris <br>Harry K. Sideris  | Chief Executive Officer <br> (Principal Executive Officer)  | July 23, 2025  |
| /s/ Brian D. Savoy <br>Brian D. Savoy  | Executive Vice President and <br> Chief Financial Officer (Principal Financial Officer)  | July 23, 2025  |
| /s/ Cynthia S. Lee <br>Cynthia S. Lee  | Senior Vice President, Chief Accounting Officer <br> and Controller <br> (Principal Accounting Officer)  | July 23, 2025  |

---

Each of the persons whose signatures appear below constitute and appoint David S. Maltz and Elizabeth H. Jones and each of them, the undersigned's true and lawful attorneys-in-fact and agents with full and several power of substitution, for the undersigned and the undersigned's name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to this Registration Statement, and to file the same, with all exhibits thereto, and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he/she might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of their substitutes, may lawfully do or cause to be done.

#### Duke Energy Carolinas, LLC Majority of Board of Directors:

---

| | | |
|:---|:---|:---|
| /s/ Kodwo Ghartey-Tagoe <br>Kodwo Ghartey-Tagoe  | Director  | July 23, 2025  |
| /s/ R. Alexander Glenn <br>R. Alexander Glenn  | Director  | July 23, 2025  |
| /s/ Harry K. Sideris <br>Harry K. Sideris  | Director  | July 23, 2025  |

---

------

[**TABLE OF CONTENTS**](#TOC)

#### SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant certifies that it has reasonable grounds to believe that it meets all the requirements for filing on Form SF-1 and has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Charlotte, State of North Carolina, on the 23rd day of July, 2025.

DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC

By:

/s/ Michael P. Callahan

Name:

Michael P. Callahan

Title:

Manager, President, Chief Financial Officer and Treasurer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

---

| | | |
|:---|:---|:---|
| **Signature**  | **Title**  | **Date**  |
| /s/ Michael P. Callahan <br>Michael P. Callahan  | Manager, President, <br> Chief Financial Officer and Treasurer <br> (Principal Executive Officer and <br> Financial Officer)  | July 23, 2025  |
| /s/ Cynthia S. Lee <br>Cynthia S. Lee  | Manager and Controller <br> (Principal Accounting Officer)  | July 23, 2025  |

---

------

## Exhibit 3.1

**Exhibit 3.1**

**CERTIFICATE OF FORMATION**

**OF**

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC**

The undersigned authorized person, desiring to form a limited liability company pursuant to the Limited Liability Company Act of the State of Delaware hereby certifies as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The name of the limited liability company is:

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The Registered Office of the limited liability company in the State of Delaware is located at The Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County of New Castle, Delaware 19801. The name of the registered agent at such address upon whom process against this limited liability company may be served is The Corporation Trust Company.

**IN WITNESS WHEREOF**, the undersigned has executed this Certificate of Formation of **Duke Energy Carolinas NC Storm Funding II LLC** this 14th day of July, 2025.

---

| | |
|:---|:---|
| By: | /s/ Cassandra M. Springer |
|  | Cassandra M. Springer |
|  | Authorized Person |

---

## Exhibit 3.2

**Exhibit 3.2**

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC**

Dated and Effective as of [ ], 2025

<u>**TABLE OF CONTENTS**</u>

<u>Page</u>

---

| | | |
|:---|:---|:---|
| ARTICLE I | GENERAL PROVISIONS | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.01 | Definitions | 1 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.02 | Sole Member; Registered Office and Agent | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.03 | Other Offices | 2 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.04 | Name | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.05 | Purpose; Nature of Business Permitted; Powers | 3 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.06 | Limited Liability Company Agreement; Certificate of Formation | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.07 | Separate Existence | 4 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.08 | Limitation on Certain Activities | 7 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 1.09 | No State Law Partnership | 8 |
| ARTICLE II | CAPITAL | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 2.01 | Initial Capital | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 2.02 | Additional Capital Contributions | 8 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 2.03 | Capital Account | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 2.04 | Interest on Capital Account | 9 |
| ARTICLE III | ALLOCATIONS; BOOKS | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.01 | Allocations of Income and Loss | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.02 | Company to be Disregarded for Tax Purposes | 9 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.03 | Books of Account | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.04 | Access to Accounting Records | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.05 | Annual Tax Information | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 3.06 | Internal Revenue Service Communications | 10 |
| ARTICLE IV | MEMBER | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4.01 | Powers | 10 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4.02 | Compensation of Member | 11 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4.03 | Other Ventures | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 4.04 | Actions by the Member | 12 |
| ARTICLE V | OFFICERS | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.01 | Designation; Term; Qualifications | 12 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.02 | Removal and Resignation | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.03 | Vacancies | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 5.04 | Compensation | 13 |
| ARTICLE VI | MEMBERSHIP INTEREST | 13 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.01 | General | 13 |

---

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.02 | Distributions | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.03 | Rights on Liquidation, Dissolution or Winding Up | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.04 | Redemption | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.05 | Voting Rights | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.06 | Transfer of Membership Interests | 14 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 6.07 | Admission of Transferee as Member | 15 |
| ARTICLE VII | MANAGERS | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.01 | Managers | 15 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.02 | Powers of the Managers | 16 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.03 | Compensation | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.04 | Removal of Managers | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.05 | Resignation of Manager | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.06 | Vacancies | 17 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.07 | Meetings of the Managers | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.08 | Electronic Communications | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.09 | Committees of Managers | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 7.10 | Limitations on Independent Managers | 18 |
| ARTICLE VIII | EXPENSES | 18 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 8.01 | Expenses | 18 |
| ARTICLE IX | PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.01 | Existence | 19 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.02 | Dissolution | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.03 | Accounting | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.04 | Certificate of Cancellation | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.05 | Winding Up | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.06 | Order of Payment of Liabilities Upon Dissolution | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.07 | Limitations on Payments Made in Dissolution | 20 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 9.08 | Limitation on Liability | 21 |
| ARTICLE X | INDEMNIFICATION | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 10.01 | Indemnity | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 10.02 | Indemnity for Actions By or In the Right of the Company | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 10.03 | Indemnity If Successful | 21 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 10.04 | Expenses | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 10.05 | Advance Payment of Expenses | 22 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 10.06 | Other Arrangements Not Excluded | 22 |

---

ii

---

| | | |
|:---|:---|:---|
| ARTICLE XI | MISCELLANEOUS PROVISIONS | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.01 | No Bankruptcy Petition; Dissolution | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.02 | Amendments | 23 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.03 | Commission Condition | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.04 | Governing Law | 24 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.05 | Headings | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.06 | Severability | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.07 | Assigns | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.08 | Enforcement by Each Independent Manager | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.09 | Waiver of Partition; Nature of Interest | 25 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;SECTION 11.10 | Benefits of Agreement; No Third-Party Rights | 25 |

---

---

| | |
|:---|:---|
| EXHIBITS, SCHEDULES AND APPENDIX | EXHIBITS, SCHEDULES AND APPENDIX |
| Schedule A | Schedule of Capital Contributions of Member |
| Schedule B | Initial Managers |
| Schedule C | Initial Officers |
| Exhibit A | Management Agreement |
| Appendix A | Definitions |

---

iii

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT OF

DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC

This AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (this "<u>Agreement</u>") of DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, a Delaware limited liability company (the "<u>Company</u>"), is made and entered into as of [ ], 2025 by DUKE ENERGY CAROLINAS, LLC, a North Carolina limited liability company (including any additional or successor members of the Company other than Special Members, the "<u>Member</u>").

WHEREAS, the Member has caused to be filed a Certificate of Formation with the Secretary of State of the State of Delaware to form the Company under and pursuant to the LLC Act and has entered into a Limited Liability Company Agreement of the Company, dated as of July 14, 2025 (the "<u>Original LLC Agreement</u>"); and

WHEREAS, in accordance with the LLC Act, the Member desires to enter into this Agreement to amend and restate in its entirety the Original LLC Agreement and to set forth the rights, powers and interests of the Member with respect to the Company and its Membership Interest therein and to provide for the management of the business and operations of the Company.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt, adequacy and sufficiency of which are hereby acknowledged, the Member, intending to be legally bound, hereby agrees to amend and restate in its entirety the Original LLC Agreement as follows:

ARTICLE I

GENERAL PROVISIONS

SECTION 1.01 <u>Definitions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Unless otherwise defined herein, capitalized terms used herein shall have the meanings assigned to them in Appendix A attached hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The words "hereof," "herein," "hereunder" and words of similar import, when used in this Agreement, shall refer to this Agreement as a whole and not to any particular provision of this Agreement; Article, Section, Schedule, Exhibit, Annex and Attachment references contained in this Agreement are references to Articles, Sections, Schedules, Exhibits, Annexes and Attachments in or to this Agreement unless otherwise specified; and the terms "<u>includes</u>" and "<u>including</u>" shall mean "includes without limitation" and "including without limitation", respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Non-capitalized terms used herein which are defined in the LLC Act, shall, as the context requires, have the meanings assigned to such terms in the LLC Act as of the date hereof, but without giving effect to amendments to the LLC Act.

SECTION 1.02 <u>Sole Member; Registered Office and Agent</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The initial sole member of the Company shall be Duke Energy Carolinas, LLC, a North Carolina limited liability company, or any successor as sole member pursuant to <u>Sections 1.02(c)</u>, <u>6.06</u> and <u>6.07</u>. The registered office and registered agent of the Company in the State of Delaware shall be **The Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County, Delaware 19801**. The Member may change said registered office and agent from one location to another in the State of Delaware. The Member shall provide notice of any such change to the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon the occurrence of any event that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon the transfer or assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee or an additional member of the Company pursuant to <u>Sections 6.06</u> and <u>6.07</u>), each Person acting as an Independent Manager (as defined herein) pursuant to the terms of this Agreement shall, without any action of any Person and simultaneously with the Member ceasing to be a member of the Company, automatically be admitted to the Company as a Special Member and shall continue the Company without dissolution. No Special Member may resign from the Company or transfer its rights as Special Member unless (i) a successor Special Member has been admitted to the Company as Special Member by executing a counterpart to this Agreement, and (ii) such successor has also accepted its appointment as an Independent Manager pursuant to this Agreement; <u>provided</u>, <u>however</u>, the Special Members shall automatically cease to be members of the Company upon the admission to the Company of a substitute Member. Each Special Member shall be a member of the Company that has no interest in the profits, losses and capital of the Company and has no right to receive any distributions of Company assets (and no Special Member shall be treated as a member of the Company for U.S. federal income tax purposes). Pursuant to Section 18-301 of the LLC Act, a Special Member shall not be required to make any capital contributions to the Company and shall not receive a limited liability company interest in the Company. A Special Member, in its capacity as Special Member, may not bind the Company. Except as required by any mandatory provision of the LLC Act, each Special Member, in its capacity as Special Member, shall have no right to vote on, approve or otherwise consent to any action by, or matter relating to, the Company, including the merger, consolidation or conversion of the Company. In order to implement the admission to the Company of each Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall execute a counterpart to this Agreement. Prior to its admission to the Company as Special Member, each Person acting as an Independent Manager pursuant to this Agreement shall not be a member of the Company. A "Special Member" means, upon such Person's admission to the Company as a member of the Company pursuant to this <u>Section 1.02(b)</u>, a Person acting as an Independent Manager, in such Person's capacity as a member of the Company. A Special Member shall only have the rights and duties expressly set forth in this Agreement. For purposes of this Agreement, a Special Member is not included within the defined term "Member".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Company may admit additional Members with the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager. Notwithstanding the preceding sentence, it shall be a condition to the admission of any additional Member that the sole Member shall have received an opinion of outside tax counsel (as selected by the Member in form and substance reasonably satisfactory to the Member) that the admission of such additional Member shall not cause the Company to be treated, for U.S. federal income tax purposes, as having more than a "sole owner" and that the Company shall not be treated, for U.S. federal income tax purposes, as an entity separate from such "sole owner".

SECTION 1.03 <u>Other Offices</u>. The Company may have an office at 525 South Tryon Street Charlotte, North Carolina 28202 or at any other offices that may at any time be established by the Member at any place or places within or outside the State of Delaware. The Member shall provide notice to the Indenture Trustee of any change in the location of the Company's office.

SECTION 1.04 <u>Name</u>. The name of the Company shall be "Duke Energy Carolinas NC Storm Funding II LLC". The name of the Company may be changed from time to time by the Member with ten (10) days' prior written notice to the Managers and the Indenture Trustee, and the filing of an appropriate amendment to the Certificate of Formation with the Secretary of State as required by the LLC Act.

SECTION 1.05 <u>Purpose; Nature of Business Permitted; Powers</u>. The Company is intended to qualify as an "Assignee" as defined in N.C. Gen. Stat. §62-172(a)(1) of the Storm Recovery Law. The purposes for which the Company is formed are limited to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) acquire, own, hold, administer, service or enter into agreements regarding the receipt and servicing of Storm Recovery Property and other Storm Recovery Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) manage, sell, assign, pledge, collect amounts due on or otherwise deal with the Storm Recovery Property and other Storm Recovery Collateral and related assets ;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) negotiate, authorize, execute, deliver, assume the obligations under, and perform its duties under, the Basic Documents and any other agreement or instrument or document relating to the activities set forth in clauses (a) and (b) above; provided, that each party to any such agreement under which material obligations are imposed upon the Company shall covenant that it shall not, prior to the date which is one year and one day after the termination of the Indenture and the payment in full of the Storm Recovery Bonds and any other amounts owed under any Indenture, acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company; or ordering the winding up or liquidation of the affairs of the Company; and provided, further, that the Company shall be permitted to incur additional indebtedness or other liabilities payable to service providers and trade creditors in the ordinary course of business in connection with the foregoing activities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) file with the U.S. Securities and Exchange Commission a registration statements, including any pre-effective or post-effective amendments thereto and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended (including any prospectus supplement, prospectus and exhibits contained therein) and file such applications, reports, surety bonds, irrevocable consents, appointments of attorney for service of process and other papers and documents necessary or desirable to register one or more series of Storm Recovery Bonds under the securities or "Blue Sky" laws of various jurisdictions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) distribute amounts released to the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) make payments on the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) after the Storm Recovery Bonds have been paid in full and discharged, and upon payment of all remaining On-going Financing Costs, distribute all remaining amounts in the Collection Account to the Member; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) engage in any lawful act or activity and exercise any powers permitted to limited liability companies formed under the laws of the State of Delaware that, in either case, are incidental to, or necessary, suitable or convenient for the accomplishment of the above-mentioned purposes.

The Company shall engage only in any activities related to the foregoing purposes or required or authorized by the terms of the Basic Documents or other agreements referenced above. The Company shall have all powers reasonably incidental, necessary, suitable or convenient to effect the foregoing purposes, including all powers granted under the LLC Act. The Company, the Member, any Manager (other than an Independent Manager), or any officer of the Company, acting singly or collectively, on behalf of the Company, may enter into and perform the Basic Documents and all registration statements, underwriting agreements, documents, agreements, certificates or financing statements contemplated thereby or related thereto, all without any further act, vote or approval of any Member, Manager or other Person, notwithstanding any other provision of this Agreement, the LLC Act, or other applicable law, rule or regulation.

Notwithstanding any other provision of this Agreement, the LLC Act or other applicable law, any Basic Document executed prior to the date hereof by any Member, Manager or officer on behalf of the Company is hereby ratified and approved in all respects. The authorization set forth in the two preceding sentences shall not be deemed a restriction on the power and authority of the Member or any Manager, including any Independent Manager, to enter into other agreements or documents on behalf of the Company as authorized pursuant to this Agreement and the LLC Act. The Company shall possess and may exercise all the powers and privileges granted by the LLC Act or by any other law or by this Agreement, together with any powers incidental thereto, insofar as such powers and privileges are incidental, necessary, suitable or convenient to the conduct, promotion or attainment of the business purposes or activities of the Company.

SECTION 1.06 <u>Limited Liability Company Agreement; Certificate of Formation</u>. This Agreement shall constitute a "limited liability company agreement" within the meaning of the LLC Act. Cassandra M. Springer, as an authorized person within the meaning of the LLC Act, has caused a certificate of formation of the Company to be executed and filed in the office of the Secretary of State on July 14, 2025 (such execution and filing being hereby ratified and approved in all respects). The existence of the Company as a separate legal entity shall continue until the cancellation of the Certificate of Formation of the Company as provided in the LLC Act.

SECTION 1.07 <u>Separate Existence</u>. Except for financial reporting purposes (to the extent required by generally accepted accounting principles) and for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, the Member and the Managers shall take all reasonable steps necessary to continue the identity of the Company as a separate legal entity and to make it apparent to third Persons that the Company is an entity with assets and liabilities distinct from those of the Member, Affiliates of the Member or any other Person, and that, the Company is not a division of any of the Affiliates of the Company or any other Person. In that regard, and without limiting the foregoing in any manner, the Company shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) maintain office space separate and clearly delineated from the office space of any Affiliate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) maintain the assets of the Company in such a manner that it is not costly or difficult to segregate, identify or ascertain its individual assets from those of any other Person, including any Affiliate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) maintain a separate telephone number;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) conduct all transactions with Affiliates on an arm's-length basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) not guarantee, become obligated for or pay the debts of any Affiliate or hold the credit of the Company out as being available to satisfy the obligations of any Affiliate or other Person (nor, except as contemplated in the Basic Documents, indemnify any Person for losses resulting therefrom), nor, except as contemplated in the Basic Documents, have any of its obligations guaranteed by any Affiliate or hold the Company out as responsible for the debts of any Affiliate or other Person or for the decisions or actions with respect to the business and affairs of any Affiliate, nor seek or obtain credit or incur any obligation to any third party based upon the creditworthiness or assets of any Affiliate or any other Person (i.e. other than based on the assets of the Company) nor allow any Affiliate to do such things based on the credit of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) except as expressly otherwise permitted hereunder or under any of the Basic Documents, not permit the commingling or pooling of the Company's funds or other assets with the funds or other assets of any Affiliate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) maintain separate deposit and other bank accounts and funds (separately identifiable from those of the Member or any other Person) to which no Affiliate has any access, which accounts shall be maintained in the name and, to the extent not inconsistent with applicable federal tax law, with the tax identification number of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) maintain full books of accounts and records (financial or other) and financial statements separate from those of its Affiliates or any other Person, prepared and maintained in accordance with generally accepted accounting principles (including, all resolutions, records, agreements or instruments underlying or regarding the transactions contemplated by the Basic Documents or otherwise) and audited annually by an independent accounting firm which shall provide such audit to the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) pay its own liabilities out of its own funds, including fees and expenses of the Administrator pursuant to the Administration Agreement and the Servicer pursuant to any Servicing Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) not hire or maintain any employees, but shall compensate (either directly or through reimbursement of the Company's allocable share of any shared expenses) all consultants, agents and Affiliates, to the extent applicable, for services provided to the Company by such consultants, agents or Affiliates, in each case, from the Company's own funds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) allocate fairly and reasonably the salaries of and the expenses related to providing the benefits of officers shared with the Member, any Special Member or any Manager;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) allocate fairly and reasonably any overhead shared with the Member, any Special Member or any Manager;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) pay from its own bank accounts for accounting and payroll services, rent, lease and other expenses (or the Company's allocable share of any such amounts provided by one or more other Affiliates) and not have such operating expenses (or the Company's allocable share thereof) paid by any Affiliates; provided, that the Member shall be permitted to pay the initial organization expenses of the Company and certain of the expenses related to the transactions contemplated by the Basic Documents as provided therein;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) maintain adequate capitalization to conduct its business and affairs considering the Company's size and the nature of its business and intended purposes and, after giving effect to the transactions contemplated by the Basic Documents, refrain from engaging in a business for which its remaining property represents an unreasonably small capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o) conduct all of the Company's business (whether in writing or orally) solely in the name of the Company through the Member and the Company's Managers, officers and agents and hold the Company out as an entity separate from any Affiliate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p) not make or declare any distributions of cash or property to the Member except in accordance with appropriate limited liability company formalities and only consistent with sound business judgment to the extent that it is permitted pursuant to the Basic Documents and not violative of any applicable law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q) otherwise practice and adhere to all limited liability company procedures and formalities to the extent required by this Agreement or all other appropriate constituent documents and the laws of its state of formation and all other appropriate jurisdictions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r) not appoint an Affiliate or any employee of an Affiliate as an agent of the Company, except as otherwise permitted in the Basic Documents (although such Persons can qualify as a Manager or as an officer of the Company);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(s) not acquire obligations or securities of, borrow money or make loans or advances to or pledge its assets for the benefit of any Affiliate, the Member or any Affiliate of the Member (other than the Company);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(t) except as expressly provided in the Basic Documents, not permit the Member or any Affiliate to guarantee, pay or become liable for the debts of the Company nor permit any such Person to hold out its creditworthiness as being available to pay the liabilities and expenses of the Company nor, except for the indemnities in this Agreement and the Basic Documents, indemnify any Person for losses resulting therefrom;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(u) maintain separate minutes of the actions of the Member and the Managers, in their capacities as such, including actions with respect to the transactions contemplated by the Basic Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) cause (i) all written and oral communications, including letters, invoices, purchase orders, and contracts, of the Company to be made solely in the name of the Company, (ii) the Company to have its own tax identification number (to the extent not inconsistent with applicable federal tax law), stationery, checks and business forms, separate from those of any Affiliate, (iii) all Affiliates not to use the stationery or business forms of the Company, and cause the Company not to use the stationery or business forms of any Affiliate, and (iv) all Affiliates not to conduct business in the name of the Company, and cause the Company not to conduct business in the name of any Affiliate;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(w) direct creditors of the Company to send invoices and other statements of account of the Company directly to the Company and not to any Affiliate and cause the Affiliates to direct their creditors not to send invoices and other statements of accounts of such Affiliates to the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x) cause the Member to maintain as official records all resolutions, agreements, and other instruments underlying or regarding the transactions contemplated by the Basic Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(y) disclose, and cause the Member to disclose, in its financial statements the effects of all transactions between the Member and the Company in accordance with generally accepted accounting principles, and in a manner which makes it clear that (i) the Company is a separate legal entity, (ii) the assets of the Company (including the Storm Recovery Property transferred to the Company pursuant to the Sale Agreement) are not assets of any Affiliate and are not available to pay creditors of any Affiliate and (iii) neither the Member nor any other Affiliate is liable or responsible for the debts of the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(z) treat and cause the Member to treat the transfer of Storm Recovery Property from the Member to the Company as a sale under the Storm Recovery Law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(aa) except as described herein with respect to tax purposes and financial reporting, describe and cause each Affiliate to describe the Company, and hold the Company out as a separate legal entity and not as a division or department of any Affiliate, and promptly correct any known misunderstanding regarding the Company's identity separate from any Affiliate or any other Person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(bb) so long as any of the Storm Recovery Bonds are outstanding, treat the Storm Recovery Bonds as debt for all purposes and specifically as debt of the Company, other than for financial reporting, state or federal regulatory or tax purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(cc) solely for purposes of federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Storm Recovery Bonds are outstanding, treat the Storm Recovery Bonds as indebtedness of the Member secured by the Storm Recovery Collateral unless otherwise required by appropriate taxing authorities;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(dd) file its own tax returns, if any, as may be required under applicable law, to the extent (i) not part of a consolidated group filing a consolidated return or returns or (ii) not treated as a division or disregarded entity for tax purposes of another taxpayer, and pay any taxes so required to be paid under applicable law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ee) maintain its valid existence in good standing under the laws of the State of Delaware and maintain its qualification to do business under the laws of such other jurisdictions as its operations require;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ff) not form, or cause to be formed, any subsidiaries;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(gg) comply with all laws applicable to the transactions contemplated by this Agreement and the Basic Documents; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(hh) cause the Member to observe in all material respects all limited liability company procedures and formalities, if any, required by this Agreement, the laws of the State of Delaware and all other appropriate jurisdictions.

SECTION 1.08 <u>Limitation on Certain Activities</u>. Notwithstanding any other provisions of this Agreement, the Company, and the Member or Managers on behalf of the Company, shall not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) engage in any business or activity other than as set forth in <u>Article I</u> hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) without the affirmative vote of the Member and the affirmative vote of all of the Managers, including each Independent Manager, file a voluntary petition for relief under the Bankruptcy Code or similar law, consent to the institution of insolvency or bankruptcy proceedings against the Company or otherwise institute insolvency or bankruptcy proceedings with respect to the Company or take any company action in furtherance of any such filing or institution of a proceeding;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) without the affirmative vote of all Managers, including each Independent Manager, and then only to the extent permitted by the Basic Documents, convert, merge or consolidate with any other Person or sell all or substantially all of its assets or acquire all or substantially all of the assets or capital stock or other ownership interest of any other Person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) take any action, file any tax return, or make any election inconsistent with the treatment of the Company, for purposes of U.S. federal income taxes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Member;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) incur any indebtedness or assume or guarantee any indebtedness of any Person (other than the indebtedness incurred under the Basic Documents);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) issue any bonds other than the Storm Recovery Bonds contemplated by the Basic Documents; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) to the fullest extent permitted by law, without the affirmative vote of its Member and the affirmative vote of all Managers, including each Independent Manager, execute any dissolution, liquidation, or winding up of the Company.

So long as any of the Storm Recovery Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any action described in <u>clause (b)</u>, <u>(c)</u> or <u>(g)</u> of this <u>Section 1.08</u> which is taken by or on behalf of the Company with the required affirmative vote of the Member and all Managers as therein described.

SECTION 1.09 <u>No State Law Partnership</u>. No provisions of this Agreement shall be deemed or construed to constitute a partnership (including a limited partnership) or joint venture, or the Member a partner or joint venturer of or with any Manager or the Company, for any purposes.

ARTICLE II

CAPITAL

SECTION 2.01 <u>Initial Capital</u>. The initial capital of the Company shall be the sum of cash contributed to the Company by the Member (the "<u>Capital Contribution</u>") in the amount set out opposite the name of the Member on <u>Schedule A</u> hereto, as amended from time to time and incorporated herein by this reference.

SECTION 2.02 <u>Additional Capital Contributions</u>. The assets of the Company are expected to generate a return sufficient to satisfy all obligations of the Company under this Agreement and the other Basic Documents and any other obligations of the Company. It is expected that no capital contributions to the Company will be necessary after the purchase of the Storm Recovery Property. On or prior to the date of issuance of the Storm Recovery Bonds, the Member shall make an additional contribution to the Company in an amount equal to at least 0.50% of the initial principal amount thereof or such greater amount as agreed to by the Member in connection with the issuance by the Company of the Storm Recovery Bonds, which amount the Company shall deposit into the Capital Subaccount established by the Indenture Trustee as provided in the Indenture. No capital contribution by the Member to the Company will be made for the purpose of mitigating losses on Storm Recovery Property that has previously been transferred to the Company, and all capital contributions shall be made in accordance with all applicable limited liability company procedures and requirements, including proper record keeping by the Member and the Company. Each capital contribution will be acknowledged by a written receipt signed by any one of the Managers. The Managers acknowledge and agree that, notwithstanding anything in this Agreement to the contrary, such additional contribution will be managed by an investment manager selected by the Servicer who shall invest such amounts only in investments eligible pursuant to the Basic Documents, and all income earned thereon shall be allocated or paid by the Indenture Trustee in accordance with the provisions of the Indenture.

SECTION 2.03 <u>Capital Account</u>. A Capital Account shall be established and maintained for the Member on the Company's books (the "<u>Capital Account</u>").

SECTION 2.04 <u>Interest on Capital Account</u>. Except for the Return On Invested Capital, no interest shall be paid or credited to the Member on its Capital Account or upon any undistributed profits left on deposit with the Company. Except as provided herein or by law, the Member shall have no right to demand or receive the return of its Capital Contribution.

ARTICLE III

ALLOCATIONS; BOOKS

SECTION 3.01 <u>Allocations of Income and Loss</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Book Allocations</u>. The net income and net loss of the Company shall be allocated entirely to the Member.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Tax Allocations</u>. Because the Company is not making (and will not make) an election to be treated as an association taxable as a corporation under Section 301.7701-3(a) of the Treasury Regulations, and because the Company is a business entity that has a single owner and is not a corporation, it is expected to be disregarded as an entity separate from its owner for U.S. federal income tax purposes under Section 301.7701-3(b)(1) of the Treasury Regulations. Accordingly, all items of income, gain, loss, deduction and credit of the Company for all taxable periods will be treated for U.S. federal income tax purposes, and for state and local income and other tax purposes to the extent permitted by applicable law, as realized or incurred directly by the Member. To the extent not so permitted, all items of income, gain, loss, deduction and credit of the Company shall be allocated entirely to the Member as permitted by applicable tax law, and the Member shall pay (or indemnify the Company, the Indenture Trustee and each of their officers, managers, employees or agents for, and defend and hold harmless each such person from and against its payment of) any taxes levied or assessed upon all or any part of the Company's property or assets based on existing law as of the date hereof, including any sales, gross receipts, general corporation, personal property, privilege, franchise or license taxes (but excluding any taxes imposed as a result of a failure of such Person to properly withhold or remit taxes imposed with respect to payments on any Storm Recovery Bond). The Indenture Trustee (on behalf of the Secured Parties) shall be a third party beneficiary of the Member's obligations set forth in this <u>Section 3.01</u>, it being understood that Holders shall be entitled to enforce their rights against the Member under this <u>Section 3.01</u> solely through a cause of action brought for their benefit by the Indenture Trustee.

SECTION 3.02 <u>Company to be Disregarded for Tax Purposes</u>. The Company shall comply with the applicable provisions of the Code and the applicable Treasury Regulations thereunder in the manner necessary to effect the intention of the parties that the Company be treated, for U.S. federal income tax purposes, as a disregarded entity that is not separate from the Member pursuant to Treasury Regulations Section 301.7701-1 et seq. and that the Company be accorded such treatment until its dissolution pursuant to <u>Article IX</u> hereof and shall take all actions, and shall refrain from taking any action, required by the Code or Treasury Regulations thereunder in order to maintain such status of the Company. In addition, for U.S. federal income tax purposes, the Company may not claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Storm Recovery Bonds (other than amounts properly withheld from such payments under the Code or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the Storm Recovery Collateral.

SECTION 3.03 <u>Books of Account</u>. At all times during the continuance of the Company, the Company shall maintain or cause to be maintained full, true, complete and correct books of account in accordance with generally accepted accounting principles, using the fiscal year and taxable year of the Member. In addition, the Company shall keep all records required to be kept pursuant to the LLC Act.

SECTION 3.04 <u>Access to Accounting Records</u>. All books and records of the Company shall be maintained at any office of the Company or at the Company's principal place of business, and the Member, and its duly authorized representative, shall have access to them at such office of the Company and the right to inspect and copy them at reasonable times.

SECTION 3.05 <u>Annual Tax Information</u>. The Managers shall cause the Company to deliver to the Member all information necessary for the preparation of the Member's U.S. federal income tax return.

SECTION 3.06 <u>Internal Revenue Service Communications</u>. The Member shall communicate and negotiate with the Internal Revenue Service on any federal tax matter on behalf of the Member and the Company.

ARTICLE IV

MEMBER

SECTION 4.01 <u>Powers</u>. Subject to the provisions of this Agreement and the LLC Act, all powers shall be exercised by or under the authority of, and the business and affairs of the Company shall be controlled by, the Member pursuant to <u>Section 4.04</u>. The Member may delegate any or all such powers to the Managers. Without prejudice to such general powers, but subject to the same limitations, it is hereby expressly declared that the Member shall have the following powers:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) To select and remove the Managers and all officers and agents of the Company, prescribe such powers and duties for them as may be consistent with the LLC Act and other applicable law and this Agreement, fix their compensation, and require from them security for faithful service; <u>provided</u>, that, except as provided in <u>Section 7.06</u>, at all times the Company shall have at least one Independent Manager. Prior to issuance of any Storm Recovery Bonds, the Member shall appoint at least one Independent Manager. An "<u>Independent Manager</u>" means an individual who (1) has prior experience as an independent director, independent manager or independent member, (2) is employed by a nationally-recognized company that provides professional Independent Managers and other corporate services in the ordinary course of its business, (3) is duly appointed as an Independent Manager and (4) is not and has not been for at least five years from the date of his or her or its appointment, and will not while serving as Independent Manager, be any of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a member, partner, equity holder, manager, director, officer or employee of the Company or any of its equity holders or Affiliates (other than as an independent director, independent manager or special member of the Company or an Affiliate of the Company that is not in the direct chain of ownership of the Company and that is required by a creditor to be a single purpose bankruptcy remote entity); <u>provided</u>, that the indirect or beneficial ownership of stock of the Member or its Affiliates through a mutual fund or similar diversified investment vehicle with respect to which the owner does not have discretion or control over the investments held by such diversified investment vehicle shall not preclude such owner from being an Independent Manager;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a creditor, supplier or service provider (including provider of professional services) to the Company, the Member or any of their respective equity holders or Affiliates (other than a nationally-recognized company that routinely provides professional Independent Managers and other corporate services to the Company, the Member or any of its Affiliates in the ordinary course of its business);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a family member of any such member, partner, equity holder, manager, director, officer, employee, creditor, supplier or service provider; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) a Person that controls (whether directly, indirectly or otherwise) any of (i), (ii) or (iii) above.

A natural person who otherwise satisfies the foregoing definition and satisfies subparagraph (i) by reason of being the independent manager or independent director of a "special purpose entity" affiliated with the Company shall be qualified to serve as an Independent Manager of the Company, provided that the fees that such individual earns from serving as an independent manager or independent director of affiliates of the Company in any given year constitute in the aggregate less than five percent (5%) of such individual's annual income for that year. For purposes of this paragraph, a "<u>special purpose entity</u>" is an entity, whose organizational documents contain restrictions on its activities and impose requirements intended to preserve such entity's separateness that are substantially similar to the Special Purpose Provisions (as hereinafter defined) of this Agreement.

The Company shall pay each Independent Manager annual fees totaling not more than **$2,500** per year (the "<u>Independent Manager Fee</u>"). Such fees shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company. Each Manager, including each Independent Manager, is hereby deemed to be a "manager" within the meaning of Section 18-101(12) of the LLC Act.

Promptly following any resignation or replacement of any Independent Manager, the Member shall give written notice to each applicable Rating Agency of any such resignation or replacement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Sections 1.07</u> and <u>1.08</u> and <u>Article VII</u> hereof, to conduct, manage and control the affairs and business of the Company, and to make such rules and regulations therefor consistent with the LLC Act and other applicable law and this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) To change the registered agent and office of the Company in Delaware from one location to another; to fix and locate from time to time one or more other offices of the Company; and to designate any place within or without the State of Delaware for the conduct of the business of the Company.

SECTION 4.02 <u>Compensation of Member</u>. To the extent permitted by applicable law, the Company shall have authority to reimburse the Member for out-of-pocket expenses incurred by the Member in connection with its service to the Company. It is understood that the compensation paid to the Member under the provisions of this <u>Section 4.02</u> shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered an On-going Financing Cost of the Company subject to the limitations on such expenses set forth in the Financing Order.

SECTION 4.03 <u>Other Ventures</u>. Notwithstanding any duties (including fiduciary duties) otherwise existing at law or in equity, it is expressly agreed that the Member, the Managers and any Affiliates, officers, directors, managers, stockholders, partners or employees of the Member, may engage in other business ventures of any nature and description, whether or not in competition with the Company, independently or with others, and the Company shall not have any rights in and to any independent venture or activity or the income or profits derived therefrom.

SECTION 4.04 <u>Actions by the Member</u>. All actions of the Member may be taken by written resolution of the Member which shall be signed on behalf of the Member by an authorized officer of the Member and filed with the records of the Company.

ARTICLE V

OFFICERS

SECTION 5.01 <u>Designation; Term; Qualifications</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Officers</u>. Subject to the last sentence of this <u>Section 5.01(a)</u>, the Managers may, from time to time, designate one or more Persons to be officers of the Company. Any officer so designated shall have such title and authority and perform such duties as the Managers may, from time to time, delegate to them. Each officer shall hold office for the term for which such officer is designated and until its successor shall be duly designated and shall qualify or until its death, resignation or removal as provided in this Agreement. Any Person may hold any number of offices. No officer need be a Manager, the Member, a Delaware resident, or a United States citizen. The Member hereby appoints the Persons identified on <u>Schedule C</u> to be the officers of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>President</u>. The President shall be the chief executive officer of the Company, shall preside at all meetings of the Managers, shall be responsible for the general and active management of the business of the Company and shall see that all orders and resolutions of the Managers are carried into effect. The President or any other officer authorized by the President or the Managers may execute all contracts, except: (i) where required or permitted by law or this Agreement to be otherwise signed and executed, including <u>Section 1.08</u>; and (ii) where signing and execution thereof shall be expressly delegated by the Managers to some other officer or agent of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Vice President</u>. In the absence of the President or in the event of the President's inability to act, the Vice President, if any (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Managers, or in the absence of any designation, then in the order of their election), shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. The Vice Presidents, if any, shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Secretary and Assistant Secretary</u>. The Secretary shall be responsible for filing legal documents and maintaining records for the Company. The Secretary shall attend all meetings of the Managers and record all the proceedings of the meetings of the Company and of the Managers in a book to be kept for that purpose and shall perform like duties for the standing committees when required. The Secretary shall give, or shall cause to be given, notice of all meetings of the Member, if any, and special meetings of the Managers, and shall perform such other duties as may be prescribed by the Managers or the President, under whose supervision the Secretary shall serve. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Managers (or if there be no such determination, then in order of their designation), shall, in the absence of the Secretary or in the event of the Secretary's inability to act, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Treasurer and Assistant Treasurer</u>. The Treasurer shall have the custody of the Company funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Company and shall deposit all moneys and other valuable effects in the name and to the credit of the Company in such depositories as may be designated by the Manager. The Treasurer shall disburse the funds of the Company as may be ordered by the Manager, taking proper vouchers for such disbursements, and shall render to the President and to the Managers, at its regular meetings or when the Managers so require, an account of all of the Treasurer's transactions and of the financial condition of the Company. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Managers (or if there be no such determination, then in the order of their designation), shall, in the absence of the Treasurer or in the event of the Treasurer's inability to act, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Managers may from time to time prescribe.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>Officers as Agents</u>. The officers of the Company, to the extent their powers as set forth in this Agreement or otherwise vested in them by action of the Managers are not inconsistent with this Agreement, are agents of the Company for the purpose of the Company's business and, subject to <u>Section 1.08</u>, the actions of the officers taken in accordance with such powers shall bind the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Duties of Managers and Officers</u>. Except to the extent otherwise provided herein, each Manager (other than the Independent Managers) and officer of the Company shall have a fiduciary duty of loyalty and care similar to that of directors and officers of business corporations organized under the General Corporation Law of the State of Delaware.

SECTION 5.02 <u>Removal and Resignation</u>. Any officer of the Company may be removed as such, with or without cause, by the Managers at any time. Any officer of the Company may resign as such at any time upon written notice to the Company. Such resignation shall be made in writing and shall take effect at the time specified therein or, if no time is specified therein, at the time of its receipt by the Managers.

SECTION 5.03 <u>Vacancies</u>. Any vacancy occurring in any office of the Company may be filled by the Managers.

SECTION 5.04 <u>Compensation</u>. The compensation, if any, of the officers of the Company shall be fixed from time to time by the Managers. Such compensation shall be determined without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.

ARTICLE VI

MEMBERSHIP INTEREST

SECTION 6.01 <u>General</u>. "<u>Membership Interest</u>" means the limited liability company interest of the Member in the Company. The Membership Interest constitutes personal property and, subject to <u>Section 6.06</u>, shall be freely transferable and assignable in whole but not in part upon registration of such transfer and assignment on the books of the Company in accordance with the procedures established for such purpose by the Managers of the Company.

SECTION 6.02 <u>Distributions</u>. The Member shall be entitled to receive, out of the assets of the Company legally available therefor, distributions payable in cash in such amounts, if any, as the Managers shall declare. Notwithstanding any provision to the contrary contained in this Agreement, the Company shall not make a distribution to the Member on account of its interest in the Company if such distribution would violate the LLC Act or any other applicable law or any Basic Document.

SECTION 6.03 <u>Rights on Liquidation, Dissolution or Winding Up</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In the event of any liquidation, dissolution or winding up of the Company, the Member shall be entitled to all remaining assets of the Company available for distribution to the Member after satisfaction (whether by payment or reasonable provision for payment) of all liabilities, debts and obligations of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Neither the sale of all or substantially all of the property or business of the Company, nor the merger or consolidation of the Company into or with another Person or other entity, shall be deemed to be a dissolution, liquidation or winding up, voluntary or involuntary, for the purpose of this <u>Section 6.03</u>.

SECTION 6.04 <u>Redemption</u>. The Membership Interest shall not be redeemable.

SECTION 6.05 <u>Voting Rights</u>. Subject to the terms of this Agreement, the Member shall have the sole right to vote on all matters as to which members of a limited liability company shall be entitled to vote pursuant to the LLC Act and other applicable law.

SECTION 6.06 <u>Transfer of Membership Interests</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Member may transfer its Membership Interest, in whole but not in part, but the transferee shall not be admitted as a Member except in accordance with <u>Section 6.07</u>. Until the transferee is admitted as a Member, the Member shall continue to be the sole member of the Company (subject to <u>Section 1.02</u>) and to be entitled to exercise any rights or powers of a Member of the Company with respect to the Membership Interest transferred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) A Member may not hold, sell, assign, pledge or otherwise transfer its Membership Interest in whole or in part to (1) an "employee benefit plan" (as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) that is subject to Title I of ERISA, a "plan" as defined in Section 4975(e)(1) of the Code that is subject to Section 4975 of the Code or an entity that is deemed to hold "plan assets" of any of the foregoing by reason of such employee benefit plan's or plan's investment in the entity or (2) a governmental, church or non-U.S. plan that is subject to any federal, state, local or other laws or regulations that are substantially similar to Title I of ERISA or Section 4975 of the Code.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) To the fullest extent permitted by law, any purported transfer of any Membership Interest in violation of the provisions of this Agreement shall be wholly void and shall not effectuate the transfer contemplated thereby. Notwithstanding anything contained herein to the contrary and to the fullest extent permitted by law, the Member may not transfer any Membership Interest in violation of any provision of this Agreement or in violation of any applicable federal or state securities laws.

SECTION 6.07 <u>Admission of Transferee as Member</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) A transferee of a Membership Interest desiring to be admitted as a Member must execute a counterpart of, or an agreement adopting, this Agreement and, except as permitted by paragraph (b) below, shall not be admitted without unanimous affirmative vote of the Managers, which vote must include the affirmative vote of each Independent Manager. Upon admission of the transferee as a Member, the transferee shall have the rights, powers and duties and shall be subject to the restrictions and liabilities of the Member under this Agreement and the LLC Act. The transferee shall also be liable, to the extent of the Membership Interest transferred, for the unfulfilled obligations, if any, of the transferor Member to make capital contributions to the Company, but shall not be obligated for liabilities unknown to the transferee at the time such transferee was admitted as a Member and that could not be ascertained from this Agreement. Except as set forth in paragraph (b) below, whether or not the transferee of a Membership Interest becomes a Member, the Member transferring the Membership Interest is not released from any liability to the Company under this Agreement or the LLC Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The approval of the Managers, including each Independent Manager, shall not be required for the transfer of the Membership Interest from the Member to any successor pursuant to <u>Section 5.02</u> of the Sale Agreement or the admission of such Person as a Member. Once the transferee of a Membership Interest pursuant to this paragraph (b) becomes a Member, the prior Member shall cease to be a member of the Company and shall be released from any liability to the Company under this Agreement and the LLC Act.

ARTICLE VII

MANAGERS

SECTION 7.01 <u>Managers</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to <u>Sections 1.07</u> and <u>1.08</u>, the business and affairs of the Company shall be managed by or under the direction of three or more Managers designated by the Member. Subject to the terms of this Agreement, the Member may determine at any time in its sole and absolute discretion the number of Managers. Subject in all cases to the terms of this Agreement, the authorized number of Managers may be increased or decreased by the Member at any time in its sole and absolute discretion, upon notice to all Managers; <u>provided</u>, that, except as provided in <u>Section 7.06</u>, at all times the Company shall have at least one Independent Manager. The initial number of Managers shall be three, one of which shall be an Independent Manager. Each Manager designated by the Member shall hold office until a successor is elected and qualified or until such Manager's earlier death, resignation, expulsion or removal. Each Manager shall execute and deliver the Management Agreement in the form attached hereto as <u>Exhibit A</u>. Managers need not be a Member. The initial Managers designated by the Member are listed on <u>Schedule B</u> hereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Each Manager shall be designated by the Member and shall hold office for the term for which designated and until a successor has been designated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Managers shall be obliged to devote only as much of their time to the Company's business as shall be reasonably required in light of the Company's business and objectives. Subject to <u>Section 7.02</u>, a Manager shall perform his or her duties as a Manager in good faith, in a manner he or she reasonably believes to be in the best interests of the Company, and with such care as an ordinarily prudent Person in a like position would use under similar circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except as otherwise provided in this Agreement, the Managers shall act by the affirmative vote of a majority of the Managers. Each Manager shall have the authority to sign duly authorized agreements and other instruments on behalf of the Company without the joinder of any other Manager.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Subject to the terms of this Agreement, any action may be taken by the Managers without a meeting and without prior notice if authorized by the written consent of a majority of the Managers (or such greater number as is required by this Agreement), which written consent shall be filed with the records of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) Every Manager is an agent of the Company for the purpose of its business, and the act of every Manager, including the execution in the Company name of any instrument for carrying on the business of the Company, binds the Company, unless such act is in contravention of this Agreement or unless the Manager so acting otherwise lacks the authority to act for the Company and the Person with whom he or she is dealing has knowledge of the fact that he or she has no such authority.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) To the extent permitted by law, the Managers shall not be personally liable for the Company's debts, obligations or liabilities.

SECTION 7.02 <u>Powers of the Managers</u>. Subject to the terms of this Agreement, the Managers shall have the right and authority to take all actions which the Managers deem incidental, necessary, suitable or convenient for the day-to-day management and conduct of the Company's business.

Each Independent Manager may not delegate his, hers or its duties, authorities or responsibilities hereunder. If any Independent Manager resigns, dies or becomes incapacitated, or such position is otherwise vacant, no action requiring the unanimous affirmative vote of the Managers shall be taken until a successor Independent Manager is appointed by the Member and qualifies and approves such action.

To the fullest extent permitted by law, including Section 18-1101(c) of the LLC Act, and notwithstanding any duty otherwise existing at law or in equity, the Independent Managers shall consider only the interests of the Company, including its creditors, in acting or otherwise voting on the matters referred to in <u>Section</u> <u>1.08</u>. Except for duties to the Company as set forth in the immediately preceding sentence (including duties to the Member and the Company's creditors solely to the extent of their respective economic interests in the Company but excluding (i) all other interests of the Member, (ii) the interests of other Affiliates of the Company, and (iii) the interests of any group of Affiliates of which the Company is a part), the Independent Managers shall not have any fiduciary duties to the Member, any Manager or any other Person bound by this Agreement; <u>provided</u>, <u>however</u>, the foregoing shall not eliminate the implied contractual covenant of good faith and fair dealing. To the fullest extent permitted by law, including Section 18-1101(e) of the LLC Act, an Independent Manager shall not be liable to the Company, the Member or any other Person bound by this Agreement for breach of contract or breach of duties (including fiduciary duties), unless the Independent Manager acted in bad faith or engaged in willful misconduct.

No Independent Manager shall at any time serve as trustee in bankruptcy for any Affiliate of the Company.

Subject to the terms of this Agreement, the Managers may exercise all powers of the Company and do all such lawful acts and things as are not prohibited by the LLC Act, other applicable law or this Agreement directed or required to be exercised or done by the Member. All duly authorized instruments, contracts, agreements and documents providing for the acquisition or disposition of property of the Company shall be valid and binding on the Company if executed by one or more of the Managers.

Notwithstanding the terms of <u>Section 7.01</u>, <u>7.07</u> or <u>7.09</u> or any provision of this Agreement to the contrary, (x) no meeting or vote with respect to any action described in <u>clause (b)</u>, <u>(c)</u> or <u>(g)</u> of <u>Section</u> <u>1.08</u> or any amendment to any of the Special Purpose Provisions (as hereinafter defined) shall be conducted unless each Independent Manager is present and (y) neither the Company nor the Member, any Manager or any officer on behalf of the Company shall (i) take any action described in <u>clause (b)</u>, <u>(c)</u> or <u>(g)</u> of <u>Section 1.08</u> or (ii) adopt any amendment to any of the Special Purpose Provisions unless each Independent Manager has consented thereto. The vote or consent of an Independent Manager with respect to any such action or amendment shall not be dictated by the Member or any other Manager or officer of the Company.

SECTION 7.03 <u>Compensation</u>. To the extent permitted by applicable law, the Company may reimburse any Manager, directly or indirectly, for reasonable and documented expenses incurred by such Manager in connection with its services rendered to the Company. These expenses include the reasonable compensation of the independent manager, expenses and disbursements of the agents, representatives, experts and counsel that the independent manager may employ in connection with the exercise and performance of their rights and duties under our limited liability company agreement, the indenture, the series supplement, the sale agreement and the servicing agreement. Such compensation shall be determined by the Managers without regard to the income of the Company, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Company and shall be considered a fixed Operating Expense of the Company subject to the limitations on such expenses set forth in the Financing Order.

SECTION 7.04 <u>Removal of Managers</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to <u>Section 4.01</u>, the Member may remove any Manager with or without cause at any time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Sections 4.01</u> and <u>7.05</u>, any removal of a Manager shall become effective on such date as may be specified by the Member and in a notice delivered to any remaining Managers or the Manager designated to replace the removed Manager (except that it shall not be effective on a date earlier than the date such notice is delivered to the remaining Managers or the Manager designated to replace the removed Manager). Should a Manager be removed who is also the Member, the Member shall continue to participate in the Company as the Member and receive its share of the Company's income, gains, losses, deductions and credits pursuant to this Agreement.

SECTION 7.05 <u>Resignation of Manager</u>. A Manager other than an Independent Manager may resign as a Manager at any time by thirty (30) days' prior notice to the Member. An Independent Manager may not withdraw or resign as a Manager of the Company without the consent of the Member. No resignation or removal of an Independent Manager, and no appointment of a successor Independent Manager, shall be effective until such successor (i) shall have accepted his or her appointment as an Independent Manager by a written instrument, which may be a counterpart signature page to the Management Agreement in the form attached hereto as <u>Exhibit A</u>, and (ii) shall have executed a counterpart to this Agreement.

SECTION 7.06 <u>Vacancies</u>. Subject to <u>Section 4.01</u>, any vacancies among the Managers may be filled by the Member. In the event of a vacancy in the position of Independent Manager, the Member shall, as soon as practicable, appoint a successor Independent Manager.

Notwithstanding anything to the contrary contained in this Agreement, no Independent Manager shall be removed or replaced unless the Company provides the Indenture Trustee with no less than two (2) Business Days' prior written notice of (a) any proposed removal of such Independent Manager, and (b) the identity of the proposed replacement Independent Manager, together with a certification that such replacement satisfies the requirements for an Independent Manager set forth in this Agreement.

SECTION 7.07 <u>Meetings of the Managers</u>. The Managers may hold meetings, both regular and special, within or outside the State of Delaware. Regular meetings of the Managers may be held without notice at such time and at such place as shall from time to time be determined by the Managers. Special meetings of the Managers may be called by the President on not less than one day's notice to each Manager by telephone, facsimile, mail, telegram or any other means of communication, and special meetings shall be called by the President or Secretary in like manner and with like notice upon the written request of any one or more of the Managers.

SECTION 7.08 <u>Electronic Communications</u>. Managers, or any committee designated by the Managers, may participate in meetings of the Managers, or any committee, by means of telephone conference or similar communications equipment that allows all Persons participating in the meeting to hear each other, and such participation in a meeting shall constitute presence in Person at the meeting. If all the participants are participating by telephone conference or similar communications equipment, the meeting shall be deemed to be held at the principal place of business of the Company.

SECTION 7.09 <u>Committees of Managers</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Managers may, by resolution passed by a majority of the Managers, designate one or more committees, each committee to consist of one or more of the Managers. The Managers may designate one or more Managers as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not such members constitute a quorum, may unanimously appoint another Manager to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Managers, shall have and may exercise all the powers and authority of the Managers in the management of the business and affairs of the Company. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Managers. Each committee shall keep regular minutes of its meetings and report the same to the Managers when required.

SECTION 7.10 <u>Limitations on Independent Managers</u>. All right, power and authority of each Independent Manager shall be limited to the extent necessary to exercise those rights and perform those duties specifically set forth in this Agreement.

ARTICLE VIII

EXPENSES

SECTION 8.01 <u>Expenses</u>. Except as otherwise provided in this Agreement or the other Basic Documents, the Company shall be responsible for all expenses and the allocation thereof including without limitation:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) all expenses incurred by the Member or its Affiliates in organizing the Company;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) all expenses related to the business of the Company and all routine administrative expenses of the Company, including the maintenance of books and records of the Company, and the preparation and dispatch to the Member of checks, financial reports, tax returns and notices required pursuant to this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) all expenses incurred in connection with any litigation or arbitration involving the Company (including the cost of any investigation and preparation) and the amount of any judgment or settlement paid in connection therewith;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) all expenses for indemnity or contribution payable by the Company to any Person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) all expenses incurred in connection with the collection of amounts due to the Company from any Person;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) all expenses incurred in connection with the preparation of amendments to this Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) all expenses incurred in connection with the liquidation, dissolution and winding up of the Company; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) all expenses otherwise allocated in good faith to the Company by the Managers.

ARTICLE IX

PERPETUAL EXISTENCE; DISSOLUTION, LIQUIDATION AND WINDING-UP

SECTION 9.01 <u>Existence</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Company shall have a perpetual existence. So long as any of the Storm Recovery Bonds are outstanding, the Member shall not be entitled to consent to the dissolution of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding any provision of this Agreement, the Bankruptcy of the Member or Special Member will not cause such Member or Special Member, respectively, to cease to be a member of the Company, and upon the occurrence of such an event, the business of the Company shall continue without dissolution. For purposes of this Section 9.01(b), "Bankruptcy" means, with respect to any Person (A) if such Person (i) makes an assignment for the benefit of creditors, (ii) files a voluntary petition in bankruptcy, (iii) is adjudged a bankrupt or insolvent, or has entered against it an order for relief, in any bankruptcy or insolvency proceedings, (iv) files a petition or answer seeking for itself any reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, (v) files an answer or other pleading admitting or failing to contest the material allegations of a petition filed against it in any proceeding of this nature, or (vi) seeks, consents to or acquiesces in the appointment of a trustee, receiver or liquidator of the Person or of all or any substantial part of its properties, or (B) if 120 days after the commencement of any proceeding against the Person seeking reorganization, arrangement, composition, readjustment, liquidation or similar relief under any statute, law or regulation, if the proceeding has not been dismissed or if within 90 days after the appointment without such Person's consent or acquiescence of a trustee, receiver or liquidator of such Person or of all or any substantial part of its properties, the appointment is not vacated or stayed, or within 90 days after the expiration of any such stay, the appointment is not vacated. The foregoing definition of "Bankruptcy" is intended to replace and shall supersede and replace the definition of "Bankruptcy" set forth in Sections 18-101(1) and 18-304 of the LLC Act. Upon the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company or that causes the Member to cease to be a member of the Company (other than upon continuation of the Company without dissolution upon an assignment by the Member of all of its limited liability company interest in the Company and the admission of the transferee pursuant to <u>Sections 6.06</u> and <u>6.07</u>), to the fullest extent permitted by law, the personal representative of such member is hereby authorized to, and shall, within ninety (90) days after the occurrence of the event that terminated the continued membership of such member in the Company, agree in writing (i) to continue the Company and (ii) to the admission of the personal representative or its nominee or designee, as the case may be, as a substitute member of the Company, effective as of the occurrence of the event that terminated the continued membership of the last remaining member of the Company or the Member in the Company.

SECTION 9.02 <u>Dissolution</u>. The Company shall be dissolved and its affairs shall be wound up upon the occurrence of the earliest of the following events:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) subject to <u>Section 1.08</u>, the election to dissolve the Company made in writing by the Member and each Manager, including each Independent Manager, as permitted under the Basic Documents and after the discharge in full of the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) the termination of the legal existence of the last remaining member of the Company or the occurrence of any event that causes the last remaining member of the Company to cease to be a member of the Company unless the business of the Company is continued without dissolution in a manner permitted by the LLC Act or this Agreement; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) the entry of a decree of judicial dissolution of the Company pursuant to Section 18-802 of the LLC Act.

SECTION 9.03 <u>Accounting</u>. In the event of the dissolution, liquidation and winding-up of the Company, a proper accounting shall be made of the Capital Account of the Member and of the net income or net loss of the Company from the date of the last previous accounting to the date of dissolution.

SECTION 9.04 <u>Certificate of Cancellation</u>. As soon as possible following the occurrence of any of the events specified in <u>Section 9.02</u> and the completion of the winding up of the Company, the Person winding up the business and affairs of the Company, as an authorized person, shall cause to be executed a Certificate of Cancellation of the Certificate of Formation and file the Certificate of Cancellation of the Certificate of Formation as required by the LLC Act.

SECTION 9.05 <u>Winding Up</u>. Upon the occurrence of any event specified in <u>Section 9.02</u>, the Company shall continue solely for the purpose of winding up its affairs in an orderly manner, liquidating its assets, and satisfying the claims of its creditors. The Member, or if there is no Member, the Managers, shall be responsible for overseeing the winding up and liquidation of the Company, shall take full account of the liabilities of the Company and its assets, shall either cause its assets to be sold or distributed, and if sold as promptly as is consistent with obtaining the fair market value thereof, shall cause the proceeds therefrom, to the extent sufficient therefor, to be applied and distributed as provided in <u>Section 9.06</u>.

SECTION 9.06 <u>Order of Payment of Liabilities Upon Dissolution</u>. After determining that all debts and liabilities of the Company, including all contingent, conditional or unmatured liabilities of the Company, in the process of winding-up, including, without limitation, debts and liabilities to the Member in the event it is a creditor of the Company to the extent otherwise permitted by law, have been paid or adequately provided for, the remaining assets shall be distributed in cash or in kind to the Member.

SECTION 9.07 <u>Limitations on Payments Made in Dissolution</u>. Except as otherwise specifically provided in this Agreement, the Member shall only be entitled to look solely to the assets of Company for the return of its positive Capital Account balance and shall have no recourse for its Capital Contribution and/or share of net income (upon dissolution or otherwise) against any Manager.

SECTION 9.08 <u>Limitation on Liability</u>. Except as otherwise provided by the LLC Act and except as otherwise characterized for tax and financial reporting purposes, the debts, obligations and liabilities of the Company, whether arising in contract, tort or otherwise, shall be solely the debts, obligations and liabilities of the Company, and no Member or Manager shall be obligated personally for any such debt, obligation or liability of the Company solely by reason of being a Member or a Manager.

ARTICLE X

INDEMNIFICATION

SECTION 10.01 <u>Indemnity</u>. Subject to the provisions of <u>Section 10.04</u> hereof, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the Company, by reason of the fact that such Person is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, partnership, corporation, joint venture, trust or other enterprise, against expenses, including attorneys' fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with the action, suit or proceeding if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to a criminal action or proceeding, had no reasonable cause to believe such Person's conduct was unlawful; <u>provided</u> that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person's fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct.

SECTION 10.02 <u>Indemnity for Actions By or In the Right of the Company</u>. Subject to the provisions of <u>Section 10.04</u> hereof, to the fullest extent permitted by law, the Company shall indemnify any Person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the rights of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Member, Manager, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, including amounts paid in settlement and attorneys' fees actually and reasonably incurred by such Person in connection with the defense or settlement of the actions or suit if such Person acted in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests of the Company; <u>provided</u> that such Person shall not be entitled to indemnification if such judgment, penalty, fine or other expense was directly caused by such Person's fraud, gross negligence or willful misconduct or, in the case of an Independent Manager, bad faith or willful misconduct. Indemnification may not be made for any claim, issue or matter as to which such Person has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to the Company or for amounts paid in settlement to the Company, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, the Person is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.

SECTION 10.03 <u>Indemnity If Successful</u>. To the fullest extent permitted by law, the Company shall indemnify any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent of the Company, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses, including reasonable attorneys' fees, actually and reasonably incurred by him or her in connection with the defense of any action, suit or proceeding referred to in <u>Sections 10.01</u> and <u>10.02</u> or in defense of any claim, issue or matter therein, to the extent that such Person has been successful on the merits.

SECTION 10.04 <u>Expenses</u>. Any indemnification under <u>Sections 10.01</u> and <u>10.02</u>, as well as the advance payment of expenses permitted under <u>Section 10.05</u> unless ordered by a court or advanced pursuant to <u>Section 10.05</u> below, must be made by the Company only as authorized in the specific case upon a determination that indemnification of the Manager, Member, officer, controlling Person, legal representative or agent is proper in the circumstances. The determination must be made:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) by the Member if the Member was not a party to the act, suit or proceeding; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) if the Member was a party to the act, suit or proceeding by independent legal counsel in a written opinion.

SECTION 10.05 <u>Advance Payment of Expenses</u>. The expenses of each Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, incurred in defending a civil or criminal action, suit or proceeding may be paid by the Company as they are incurred and in advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of such Person to repay the amount if it is ultimately determined by a court of competent jurisdiction that such Person is not entitled to be indemnified by the Company. The provisions of this <u>Section 10.05</u> shall not affect any rights to advancement of expenses to which personnel other than the Member or the Managers (other than each Independent Manager) may be entitled under any contract or otherwise by law.

SECTION 10.06 <u>Other Arrangements Not Excluded</u>. The indemnification and advancement of expenses authorized in or ordered by a court pursuant to this <u>Article X</u>:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) does not exclude any other rights to which a Person seeking indemnification or advancement of expenses may be entitled under any agreement, decision of the Member, consent or action of the Managers, or otherwise, for either an action of any Person who is or was a Manager, Member, officer, controlling Person, legal representative or agent, or is or was serving at the request of the Company as a member, manager, director, officer, partner, shareholder, controlling Person, legal representative or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, in the official capacity of such Person or an action in another capacity while holding such position, except that indemnification and advancement, unless ordered by a court pursuant to <u>Section 10.05</u> above, may not be made to or on behalf of such Person if a final adjudication established that its acts or omissions involved intentional misconduct, fraud or a knowing violation of the law and were material to the cause of action; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) continues for a Person who has ceased to be a Member, Manager, officer, legal representative or agent and inures to the benefit of the successors, heirs, executors and administrators of such a Person.

ARTICLE XI

MISCELLANEOUS PROVISIONS

SECTION 11.01 <u>No Bankruptcy Petition; Dissolution</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, prior to the date which is one year and one day after the termination of the Indenture and the payment in full of the Storm Recovery Bonds and any other amounts owed under the Indenture, it will not acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company; provided, however, that nothing in this <u>Section 11.01</u> shall constitute a waiver of any right to indemnification, reimbursement or other payment from the Company pursuant to this Agreement. This <u>Section 11.01</u> is not intended to apply to the filing of a voluntary bankruptcy petition on behalf of the Company which is governed by <u>Section 1.08</u> of this Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) To the fullest extent permitted by law, the Member, each Special Member and each Manager hereby covenant and agree (or shall be deemed to have hereby covenanted and agreed) that, until the termination of the Indenture and the payment in full of the Storm Recovery Bonds and any other amounts owed under the Indenture, the Member, such Special Member and such Manager will not consent to, or make application for, or institute or maintain any action for, the dissolution of the Company under Section 18-801 or 18-802 of the LLC Act or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) In the event that the Member, any Special Member or any Manager takes action in violation of this <u>Section 11.01</u>, the Company agrees that it shall file an answer with the court or otherwise properly contest the taking of such action and raise the defense that the Member, the Special Member or Manager, as the case may be, has agreed in writing not to take such action and should be estopped and precluded therefrom and such other defenses, if any, as its counsel advises that it may assert.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The provisions of this <u>Section 11.01</u> shall survive the termination of this Agreement and the resignation, withdrawal or removal of the Member, any Special Member or any Manager. Nothing herein contained shall preclude participation by the Member, any Special Member or a Manager in assertion or defense of its claims in any such proceeding involving the Company.

SECTION 11.02 <u>Amendments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The power to alter, amend or repeal this Agreement shall be only with the consent of the Member, <u>provided</u>, that the Company shall not alter, amend or repeal any provision of <u>Sections 1.02(b)</u> and <u>(c)</u>, <u>1.05</u>, <u>1.07</u>, <u>1.08</u>, <u>3.01(b)</u>, <u>3.02</u>, <u>6.06</u>, <u>6.07</u>, <u>7.02</u>, <u>7.05</u>, <u>7.06</u>, <u>9.01</u>, <u>9.02</u>, <u>11.02</u> and <u>11.07</u> of this Agreement or the definition of "Independent Manager" contained herein or the requirement that at all times the Company have at least one Independent Manager (collectively, the "<u>Special Purpose Provisions</u>") without, in each case, the affirmative vote of a majority of the Managers, which vote must include the affirmative vote of each Independent Manager. So long as any of the Storm Recovery Bonds are outstanding, the Company and the Member shall give written notice to each applicable Rating Agency of any amendment to this Agreement. The effectiveness of any amendment of the Special Purpose Provisions shall be subject to the Rating Agency notice conditions set forth in the Basic Documents (other than an amendment which is necessary: (i) to cure any ambiguity or (ii) to correct or supplement any such provision in a manner consistent with the intent of this Agreement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Company's power to alter or amend the Certificate of Formation shall be vested in the Member. Upon obtaining the approval of any amendment, supplement or restatement as to the Certificate of Formation, the Member on behalf of the Company shall cause a Certificate of Amendment or Amended and Restated Certificate of Formation to be prepared, executed and filed in accordance with the LLC Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything in this Agreement to the contrary, including <u>Sections 11.02(a)</u> and <u>(b)</u>, unless and until the Storm Recovery Bonds are issued and outstanding, the Member may, without the need for any consent or action of, or notice to, any other Person, including any Manager, any officer, the Indenture Trustee or any Rating Agency, alter, amend or repeal this Agreement in any manner.

SECTION 11.03 <u>Commission Condition</u>. Notwithstanding anything to the contrary in <u>Section 11.02</u>, no amendment or modification of this Agreement shall be effective unless the process set forth in this <u>Section 11.03</u> has been followed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) At least fifteen (15) days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in <u>Section 11.02</u> above (except that the consent of the Indenture Trustee may be subject to the consent of Holders of the Storm Recovery Bonds if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification), the Member shall have filed in Commission docket E-7, Sub 1325 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) a reference to Docket No. E-7, Sub 1325;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) an Officer's Certificate stating that the proposed amendment or modification has been approved by all parties to this Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a statement identifying the person to whom the Commission or its authorized representative is to address any response to the proposed amendment or modification or to request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) If the Commission, within 15 days of receiving a notification complying with subparagraph (i), shall have an order that the Commission might object to the proposed amendment or modification, then, subject to clause (c) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in <u>Section 11.03(a)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Following the delivery of an order from the Commission to the Member under subparagraph (b), the Member and the Company shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment. The fact that the Administrator delivers notice to the Commission pursuant to <u>Section 11.03(b)</u> does not obligate the Administrator to amend the Agreement as provided in the notice.

SECTION 11.04 <u>Governing Law</u>. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT REFERENCE TO ITS CONFLICT OF LAW PROVISIONS, AND THE OBLIGATIONS, RIGHTS AND REMEDIES OF THE PARTIES HEREUNDER SHALL BE DETERMINED IN ACCORDANCE WITH SUCH LAWS.

SECTION 11.05 <u>Headings</u>. The headings of the various Articles and Sections herein are for convenience of reference only and shall not define or limit any of the terms or provisions hereof.

SECTION 11.06 <u>Severability</u>. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 11.07 <u>Assigns</u>. Each and all of the covenants, terms, provisions and agreements contained in this Agreement shall be binding upon and inure to the benefit of the Member, and its permitted successors and assigns.

SECTION 11.08 <u>Enforcement by Each Independent Manager</u>. Notwithstanding any other provision of this Agreement, the Member agrees that this Agreement constitutes a legal, valid and binding agreement of the Member, and is enforceable against the Member by each Independent Manager in accordance with its terms.

SECTION 11.09 <u>Waiver of Partition; Nature of Interest</u>. Except as otherwise expressly provided in this Agreement, to the fullest extent permitted by law, each of the Member and the Special Members hereby irrevocably waives any right or power that such Person might have to cause the Company or any of its assets to be partitioned, to cause the appointment of a receiver for all or any portion of the assets of the Company, to compel any sale of all or any portion of the assets of the Company pursuant to any applicable law or to file a complaint or to institute any proceeding at law or in equity to cause the dissolution, liquidation, winding up or termination of the Company. The Member shall not have any interest in any specific assets of the Company, and the Member shall not have the status of a creditor with respect to any distribution pursuant to this Agreement.

SECTION 11.10 <u>Benefits of Agreement; No Third-Party Rights</u>. Except for the Indenture Trustee with respect to the Special Purpose Provisions and Persons entitled to indemnification hereunder, none of the provisions of this Agreement shall be for the benefit of or enforceable by any creditor of the Company or by any creditor of the Member or Special Member. Nothing in this Agreement shall be deemed to create any right in any Person (other than the Indenture Trustee with respect to the Special Purpose Provisions and Persons entitled to indemnification hereunder) not a party hereto, and this Agreement shall not be construed in any respect to be a contract in whole or in part for the benefit of any third Person.

[SIGNATURE PAGE FOLLOWS]

IN WITNESS WHEREOF, this Agreement is hereby executed by the undersigned as the sole Member of the Company and is effective as of the date first written above.

DUKE ENERGY CAROLINAS, LLC <br>By:  

Name: <br> Title: <br>

ACKNOWLEDGED AND AGREED:

[<u> </u>],

as Independent Manager

*Signature Page to Limited Liability Company Agreement*

SCHEDULE A

SCHEDULE OF CAPITAL CONTRIBUTIONS OF MEMBER

---

| | | | |
|:---|:---|:---|:---|
| MEMBER'S NAME | CAPITAL<br> CONTRIBUTION | MEMBERSHIP <br> INTEREST <br> PERCENTAGE | CAPITAL <br> ACCOUNT |
| Duke Energy Carolinas, LLC | $100 | 100% | $100 |

---

SCHEDULE A

SCHEDULE B

INITIAL MANAGER

Michael P. Callahan

Cynthia S. Lee

SCHEDULE C

SCHEDULE C

INITIAL OFFICERS

---

| | |
|:---|:---|
| <u>Name</u> | <u>Office</u> |
| [Michael P. Callahan | President, Chief Financial Officer and Treasurer |
| Cynthia S. Lee | Controller |
| Elizabeth H. Jones | Secretary |
| [ ] | Assistant Treasurer |
| [ ] | Assistant Treasurer |
| [ ] | Assistant Secretary |
| [ ] | Assistant Secretary] |

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SCHEDULE C

EXHIBIT A

MANAGEMENT AGREEMENT

[filing date]

Duke Energy Carolinas NC Storm Funding II LLC

525 South Tryon Street<br> Charlotte, North Carolina 28202

Re: <u>Management Agreement — Duke Energy Carolinas NC Storm Funding II LLC</u>

Ladies and Gentlemen:

For good and valuable consideration, each of the undersigned Persons, who have been designated as managers of Duke Energy Carolinas NC Storm Funding II LLC, a Delaware limited liability company (the "<u>Company</u>"), in accordance with the Amended and Restated Limited Liability Company Agreement of the Company, dated as of [ ], 2025 (as it may be amended, restated, supplemented or otherwise modified from time to time, the "<u>LLC Agreement</u>"), hereby agree as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. Each of the undersigned accepts such Person's rights and authority as a Manager under the LLC Agreement and agrees to perform and discharge such Person's duties and obligations as a Manager under the LLC Agreement, and further agrees that such rights, authorities, duties and obligations under the LLC Agreement shall continue until such Person's successor as a Manager is designated or until such Person's resignation or removal as a Manager in accordance with the LLC Agreement. Each of the undersigned agrees and acknowledges that it has been designated as a "manager" of the Company within the meaning of the Delaware Limited Liability Company Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Until a year and one day has passed since the date that the last obligation under the Basic Documents was paid, to the fullest extent permitted by law, each of the undersigned agrees, solely in its capacity as a creditor of the Company on account of any indemnification or other payment owing to the undersigned by the Company, not to acquiesce, petition or otherwise invoke or cause the Company to invoke the process of any court or governmental authority for the purpose of commencing or sustaining a case against the Company under any federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Company or any substantial part of the property of the Company, or ordering the winding up or liquidation of the affairs of the Company.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. THIS MANAGEMENT AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, AND ALL RIGHTS AND REMEDIES SHALL BE GOVERNED BY SUCH LAWS WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS.

Capitalized terms used and not otherwise defined herein have the meanings set forth in the LLC Agreement.

This Management Agreement may be executed in any number of counterparts, each of which shall be deemed an original of this Management Agreement and all of which together shall constitute one and the same instrument.

EXHIBIT A-1-2

IN WITNESS WHEREOF, the undersigned have executed this Management Agreement as of the day and year first above written.

EXHIBIT A-1-3

APPENDIX A

DEFINITIONS

As used in this Agreement, the following terms have the following meanings:

"<u>Administration Agreement</u>" means an administration agreement to be entered into between the Company and the Administrator pursuant to which the Administrator will provide certain management services to the Company.

"<u>Administrator</u>" means DEC, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

"<u>Affiliate</u>" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"<u>Agreement</u>" has the meaning set forth in the preamble to this Agreement.

"<u>Bankruptcy</u>" is defined in <u>Section 9.01(b)</u> of this Agreement.

"<u>Bankruptcy Code</u>" means Title 11 of the United States Code (11 U.S.C. §§ 101 <u>et seq</u>.), as amended from time to time.

"<u>Basic Documents</u>" means the Indenture, the Administration Agreement, the Sale Agreement, the Bill of Sale, the Certificate of Formation, the Original LLC Agreement, this Agreement, the Servicing Agreement, the Series Supplement, the Intercreditor Agreements, the joinder to the DEBS Intercreditor Agreement, the Letter of Representations, the Underwriting Agreement and all other documents and certificates delivered in connection therewith.

"<u>Bill of Sale</u>" means the bill of sale in connection with the sale of the Storm Recovery Property pursuant to the Sale Agreement.

"<u>Business Day</u>" means any day other than a Saturday, a Sunday or a day on which banking institutions in Charlotte, North Carolina or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.

"<u>Capital Account</u>" is defined in <u>Section 2.03</u> of this Agreement.

"<u>Capital Contribution</u>" is defined in <u>Section 2.01</u> of this Agreement.

"<u>Capital Subaccount</u>" is defined in <u>Section 8.02(a)</u> of the Indenture.

"<u>Certificate of Formation</u>" means the Certificate of Formation filed with the Secretary of State on July 14, 2025 pursuant to which the Company was formed.

"<u>Clearing Agency</u>" means an organization registered as a "clearing agency" pursuant to Section 17A of the Securities Exchange Act of 1934, as amended.

EXHIBIT A-1-4

"<u>Code</u>" means the Internal Revenue Code of 1986, as amended.

"<u>Collection Account</u>" means the account established and maintained by the Indenture Trustee in connection with the Indenture and any subaccounts contained therein.

"<u>Commission</u>" means the North Carolina Utilities Commission.

"<u>Company</u>" has the meaning set forth in the preamble to this Agreement.

"<u>Corporate Trust Office</u>" means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office (for all purposes other than registration of transfer of the Storm Recovery Bonds) as of the date hereof is located at 190 S. LaSalle Street, 7th Floor, Chicago, IL 60603, Attention: Duke Energy Carolinas NC Storm Funding II LLC, Series A, and for registration of transfers of Storm Recovery Bonds, the office is located at 111 Fillmore Avenue East, St. Paul, MN 55107, Attention: Bondholder Services— Duke Energy Carolinas NC Storm Funding II LLC, Series A, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Storm Recovery Bonds and the Company, or the principal corporate trust office of any successor trustee designated by like notice.

"<u>DEBS Intercreditor Agreement</u>" means the Amended and Restated Intercreditor Agreement, dated December 20, 2013, by and among Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Duke Energy Progress, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress NC Storm Funding LLC, Duke Energy Progress SC Storm Funding LLC, the Indenture Trustee (as trustee of Duke Energy Progress SC Storm Funding LLC), the Bank of New York Mellon Trust Company, N.A. (as trustee of Duke Energy Progress NC Storm Funding LLC), the Bank of New York Mellon Trust Company, N.A. (as trustee of Duke Energy Carolinas NC Storm Funding LLC), and DEC, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>DEC</u>" means Duke Energy Carolinas, LLC, a North Carolina limited liability company, and any of its successors or permitted assigns.

"<u>DEC Intercreditor Agreement</u>" means the intercreditor agreement, to be entered into by and among the Bank of New York Mellon Trust Company, N.A.(as trustee of Duke Energy Carolinas NC Storm Funding LLC), the Indenture Trustee (as trustee of the Company), Duke Energy Carolinas NC Storm Funding LLC, the Company and DEC as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>DTC</u>" means The Depository Trust Company.

"<u>ERISA</u>" means the Employee Retirement Income Security Act of 1974, as amended.

"<u>Financing Order</u>" means the financing order issued by the Commission to DEC on June 18, 2025, Docket No. E-7, Sub 1325, authorizing the creation of the Storm Recovery Property.

"<u>Governmental Authority</u>" means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

"<u>Holder</u>" means the Person in whose name a Storm Recovery Bond is registered.

EXHIBIT A-1-5

"<u>Indenture</u>" means an Indenture to be entered into between the Company and the Indenture Trustee authorizing the issuance of the Storm Recovery Bonds, as originally executed and, as from time to time supplemented or amended by any supplements or indentures supplemental thereto entered into pursuant to the applicable provisions of the Indenture, as so supplemented or amended, or both, and shall include the forms and terms of the Storm Recovery Bonds established thereunder.

"<u>Indenture Trustee</u>" means U.S. Bank Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any successor indenture trustee for the benefit of the Secured Parties, under the Indenture.

"<u>Independent Manager</u>" is defined in <u>Section 4.01(a)</u> of this Agreement.

"<u>Independent Manager Fee</u>" is defined in <u>Section 4.01(a)</u> of this Agreement.

"<u>Intercreditor Agreements</u>" means the DEBS Intercreditor Agreement and the DEC Intercreditor Agreement.

"<u>Letter of Representations</u>" means any applicable agreement between the Company and the applicable Clearing Agency, with respect to such Clearing Agency's rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds (as defined in the Indenture).

"<u>LLC Act</u>" means the Delaware Limited Liability Company Act, as amended.

"<u>Manager</u>" means each manager of the Company under this Agreement.

"<u>Member</u>" has the meaning set forth in the preamble to this Agreement.

"<u>Membership Interest</u>" is defined in <u>Section 6.01</u> of this Agreement.

"<u>Moody's</u>" means Moody's Investors Service, Inc. References to Moody's are effective so long as Moody's is a Rating Agency.

"<u>On-going Financing Costs</u>" means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; provided, however, that On-going Financing Costs do not include the Company's costs of issuance of the Storm Recovery Bonds.

"<u>Operating Expenses</u>" means all unreimbursed fees, costs and out-of-pocket expenses of the Company, including all amounts owed by the Company to the Indenture Trustee (including indemnitees, legal fees and expense), or any Manager, fees of the Servicer pursuant to the Servicing Agreement, fees of the Administrator pursuant to the Administration Agreement, legal and accounting fees, Rating Agency and related fees (i.e. website provider fees), and any franchise, license or other taxes owed by the Company, including on investment income in the Collection Account.

"<u>Original LLC Agreement</u>" has the meaning set forth in the preamble to this Agreement.

"<u>Person</u>" means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Government Authority.

EXHIBIT A-1-6

"<u>Rating Agency</u>" with respect to any tranche of the Storm Recovery Bonds, means each of Moody's Investors Service, Inc., Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, or any successors thereto, which provides a rating with respect to the Storm Recovery Bonds. If no such organization or successor is any longer in existence, "Rating Agency" shall be a nationally recognized statistical rating organization or other comparable Person designated by the Company, notice of which designation shall be given to the Indenture Trustee and the Servicer.

"<u>Return on Invested Capital</u>" means, for any payment date, with respect to any remittance period, the sum of (i) rate of return, payable to Duke Energy Carolinas, or its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of Storm Recovery Bonds plus (ii) any Return on Invested Capital not paid on any prior payment date.

"<u>Sale Agreement</u>" means a sale agreement to be entered into pursuant to which the Seller will sell its rights and interests in the Storm Recovery Property to the Company.

"<u>Secretary of State</u>" means the Secretary of State of the State of Delaware.

"<u>Secured Parties</u>" means the Indenture Trustee, the Holders and any credit enhancer described in the Series Supplement.

"<u>Seller</u>" means DEC.

"<u>Series Supplement</u>" means the indenture supplemental to the Indenture in the form attached as an exhibit to the Indenture that authorizes the issuance of the Storm Recovery Bonds.

"<u>Servicer</u>" means DEC, as Servicer under the Servicing Agreement, or any successor Servicer to the extent permitted under the Servicing Agreement.

"<u>Servicing Agreement</u>" means a servicing agreement to be entered into pursuant to which the Servicer will service the Storm Recovery Property on behalf of the Company.

"<u>Special Member</u>" is defined in <u>Section</u> <u>1.02(b)</u> of this Agreement.

"<u>Special Purpose Provisions</u>" is defined in <u>Section 11.02(a)</u> of this Agreement.

"<u>Storm Recovery Bonds</u>" means the Storm Recovery Bonds authorized by the Financing Order and issued under an Indenture.

"<u>Storm Recovery Collateral</u>" means the Storm Recovery Property created under and pursuant to the Financing Order and the Storm Recovery Law, and transferred by the Seller to the Company pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive Storm Recovery Charges, the right to obtain periodic adjustments to the Storm Recovery Charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the Financing Order), (a) all Storm Recovery Charges related to the Storm Recovery Property, (b) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Storm Recovery Property and Storm Recovery Bonds, (c) the Servicing Agreement, the Administration Agreement, the Intercreditor Agreements and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Storm Recovery Property and the Storm Recovery Bonds, (d) the Collection Account, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (e) all rights to compel the Servicer to file for and obtain periodic adjustments to the Storm Recovery Charges in accordance with Section 62-172(b)(3)d. of the Storm Recovery Law and the Financing Order, (f) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Storm Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (g) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing and (h) all payments on or under, and all proceeds in respect of, any or all of the foregoing.

EXHIBIT A-1-7

"<u>Storm Recovery Charge</u>" means any storm recovery charge as defined in Section 62-172(a)(15) of the Storm Recovery Law that is authorized by the Financing Order.

"<u>Storm Recovery Law</u>" means the laws of the State of North Carolina adopted in November 6, 2019 enacted as N.C. Gen. Stat. §62-172, as may be amended from time to time.

"<u>Storm Recovery Property</u>" means all storm recovery property as defined in Section 62-172(a)(17) of the Storm Recovery Law created pursuant to the Financing Order and under the Storm Recovery Law, including the right to impose, bill, charge, collect and receive the Storm Recovery Charges authorized under the Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in Section 366.95(a)(17)b. of the Storm Recovery Law, regardless of whether such revenues, collections, claims, rights to payments, payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.

"<u>Tariff</u>" means [Rider STS-1] filed with the Commission, as the same may be amended, restated, supplemented or otherwise modified from time to time, including, without limitation, with respect to any successor.

"<u>Tranche</u>" means any of the tranches of Storm Recovery Bonds.

"<u>Treasury Regulations</u>" means the regulations, including proposed or temporary regulations, promulgated under the Code.

"<u>Underwriting Agreement</u>" means the Underwriting Agreement, to be dated as of the date the Storm Recovery Bonds are priced, by and among DEC, the representatives of the several underwriters named therein and the Company.

EXHIBIT A-1-8

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <u>Other Terms</u>. All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control. As used in the Basic Documents, the term "<u>including</u>" means "including without limitation," and other forms of the verb "to include" have correlative meanings. All references to any Person shall include such Person's permitted successors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. <u>Computation of Time Periods</u>. Unless otherwise stated in any of the Basic Documents, as the case may be, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and the words "to" and "until" each means "to but excluding".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;D. <u>Reference; Captions</u>. The words "hereof", "herein" and "hereunder" and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document; and references to "<u>Section</u>", "<u>subsection</u>", "<u>Schedule</u>" and "<u>Exhibit</u>" in any Basic Document are references to Sections, subsections, Schedules and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document. The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;E. <u>Terms Generally</u>. The definitions contained in this <u>Appendix A</u> are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter forms of such terms.

EXHIBIT A-1-9

## Exhibit 4.1

**Exhibit 4.1**

**INDENTURE**

**by and among**

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, Issuer**

**and**

**U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, Indenture Trustee**

**and**

**U.S. BANK NATIONAL ASSOCIATION, Securities Intermediary and Account Bank**

**Dated as of [Closing Date], 2025**

<u>**TABLE OF CONTENTS**</u>

<u>Page</u>

ARTICLE I Definitions AND RULES OF CONSTRUCTION; Incorporation by Reference 9

SECTION 1.01. Definitions and Rules of Construction 9 <br> SECTION 1.02. Incorporation by Reference of Trust Indenture Act 9 <br>

ARTICLE II The Storm Recovery Bonds 9

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| | | |
|:---|:---|:---|
| SECTION 2.01. | Form | 9 |
| SECTION 2.02. | Denominations: Storm Recovery Bonds | 10 |
| SECTION 2.03. | Execution, Authentication and Delivery | 11 |
| SECTION 2.04. | Temporary Storm Recovery Bonds | 12 |
| SECTION 2.05. | Registration; Registration of Transfer and Exchange of Storm Recovery Bonds | 12 |
| SECTION 2.06. | Mutilated, Destroyed, Lost or Stolen Storm Recovery Bonds | 14 |
| SECTION 2.07. | Persons Deemed Owner | 15 |
| SECTION 2.08. | Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved | 15 |

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| | | |
|:---|:---|:---|
| SECTION 2.09. | Cancellation | 16 |
| SECTION 2.10. | Outstanding Amount; Authentication and Delivery of Storm Recovery Bonds | 16 |

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SECTION 2.11. Book-Entry Storm Recovery Bonds 20

SECTION 2.12. Notices to Clearing Agency 21

SECTION 2.13. Definitive Storm Recovery Bonds 21

SECTION 2.14. CUSIP Number 21

SECTION 2.15. Letter of Representations 21

SECTION 2.16. Tax Treatment 22

SECTION 2.17. State Pledge 22

SECTION 2.18. Security Interests 23 <br>

ARTICLE III Covenants 24

SECTION 3.01. Payment of Principal, Premium, if any, and Interest 24

SECTION 3.02. Maintenance of Office or Agency 24

SECTION 3.03. Money for Payments To Be Held in Trust 24

SECTION 3.04. Existence 26

SECTION 3.05. Protection of Collateral 26

SECTION 3.06. Opinions as to Collateral 26

SECTION 3.07. Performance of Obligations; Servicing; SEC Filings 27

SECTION 3.08. Certain Negative Covenants 30

SECTION 3.09. Annual Statement as to Compliance 31

SECTION 3.10. Issuer May Consolidate, etc., Only on Certain Terms 31

SECTION 3.11. Successor or Transferee 33

SECTION 3.12. No Other Business 33

SECTION 3.13. No Borrowing 33

SECTION 3.14. Servicer's Obligations 33

SECTION 3.15. Guarantees, Loans, Advances and Other Liabilities 34

SECTION 3.16. Capital Expenditures 34

SECTION 3.17. Restricted Payments 34

SECTION 3.18. Notice of Events of Default 34

SECTION 3.19. Further Instruments and Acts 34

SECTION 3.20. Inspection 35

SECTION 3.21. Notice of Events of Default 35

SECTION 3.22. Additional Storm Recovery Bonds 35

SECTION 3.23. Sale Agreement, Servicing Agreement, Intercreditor Agreements and Administration Agreement Covenants 35

SECTION 3.24. Taxes 37

SECTION 3.25. Notices from Holders 37

SECTION 3.26. Volcker Rule 37 <br>

ARTICLE IV Satisfaction and Discharge; Defeasance 38

SECTION 4.01. Satisfaction and Discharge of Indenture; Defeasance 38

SECTION 4.02. Conditions to Defeasance 39

SECTION 4.03. Application of Trust Money 41

SECTION 4.04. Repayment of Moneys Held by Paying Agent 41 <br>

ARTICLE V Remedies 41

SECTION 5.01. Events of Default 41

SECTION 5.02. Acceleration of Maturity; Rescission and Annulment 43

SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by Indenture Trustee 44

SECTION 5.04. Remedies; Priorities 46

SECTION 5.05. Optional Preservation of the Collateral 47

SECTION 5.06. Limitation of Suits 47

SECTION 5.07. Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest 48

SECTION 5.08. Restoration of Rights and Remedies 48

SECTION 5.09. Rights and Remedies Cumulative 48

SECTION 5.10. Delay or Omission Not a Waiver 49

SECTION 5.11. Control by Holders 49

SECTION 5.12. Waiver of Past Defaults 49

SECTION 5.13. Undertaking for Costs 50

SECTION 5.14. Waiver of Stay or Extension Laws 50

SECTION 5.15. Action on Storm Recovery Bonds 50 <br>

ARTICLE VI The Indenture Trustee 51

SECTION 6.01. Duties of Indenture Trustee 51

SECTION 6.02. Rights of Indenture Trustee 53

SECTION 6.03. Individual Rights of Indenture Trustee 55

SECTION 6.04. Indenture Trustee's Disclaimer 56

SECTION 6.05. Notice of Defaults 56

SECTION 6.06. Reports by Indenture Trustee to Holders 57

SECTION 6.07. Compensation and Indemnity 58

SECTION 6.08. Replacement of Indenture Trustee and Securities Intermediary and the Account Bank 59

SECTION 6.09. Successor Indenture Trustee by Merger 60

SECTION 6.10. Appointment of Co-Trustee or Separate Trustee 60

SECTION 6.11. Eligibility; Disqualification 61

SECTION 6.12. Preferential Collection of Claims Against Issuer 62

SECTION 6.13. Representations and Warranties of Indenture Trustee 62

SECTION 6.14. Annual Report by Independent Registered Public Accountants 62

SECTION 6.15. Custody of Collateral 62

SECTION 6.16. FATCA 63 <br>

ARTICLE VII Holders' Lists and Reports 63

SECTION 7.01. Issuer To Furnish Indenture Trustee Names and Addresses of Holders 63

SECTION 7.02. Preservation of Information; Communications to Holders 63

SECTION 7.03. Reports by Issuer 64

SECTION 7.04. Reports by Indenture Trustee 64 <br>

ARTICLE VIII Accounts, Disbursements and Releases 65

SECTION 8.01. Collection of Money 65

SECTION 8.02. Collection Account 65

SECTION 8.03. General Provisions Regarding the Collection Account 69

SECTION 8.04. Release of Collateral 70

SECTION 8.05. Opinion of Counsel 70

SECTION 8.06. Reports by Independent Registered Public Accountants 71 <br>

ARTICLE IX SUPPLEMENTAL INDENTURES 71

SECTION 9.01. Supplemental Indentures Without Consent of Holders 71

SECTION 9.02. Supplemental Indentures with Consent of Holders 73

SECTION 9.03. Commission Condition 74

SECTION 9.04. Execution of Supplemental Indentures 75

SECTION 9.05. Effect of Supplemental Indenture 75

SECTION 9.06. Conformity with Trust Indenture Act 76

SECTION 9.07. Reference in Storm Recovery Bonds to Supplemental Indentures 76 <br>

ARTICLE X MISCELLANEOUS 76

SECTION 10.01. Compliance Certificates and Opinions, etc. 76

SECTION 10.02. Form of Documents Delivered to Indenture Trustee 78

SECTION 10.03. Acts of Holders 78

SECTION 10.04. Notices, etc., to Indenture Trustee, Issuer and Rating Agencies 79

SECTION 10.05. Notices to Holders; Waiver 80

SECTION 10.06. Conflict with Trust Indenture Act 81

SECTION 10.07. Successors and Assigns 81

SECTION 10.08. Severability 81

SECTION 10.09. Benefits of Indenture 81

SECTION 10.10. Legal Holidays 81

SECTION 10.11. GOVERNING LAW 81

SECTION 10.12. Counterparts 81

SECTION 10.13. Recording of Indenture 82

SECTION 10.14. No Recourse to Issuer 82 <br> SECTION 10.15. Basic Documents 82

SECTION 10.16. No Petition 83

SECTION 10.17. Securities Intermediary and Account Bank 83

SECTION 10.18. Rule 17g-5 Compliance 83

SECTION 10.19. Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial 84

SECTION 10.20. Certain Tax Laws 84

EXHIBITS

Exhibit A Form of Storm Recovery Bonds <br> Exhibit B Form of Series Supplement <br> Exhibit C Servicing Criteria to be Addressed by Indenture Trustee in Assessment of Compliance

APPENDIX

Appendix A Definitions and Rules of Construction

<u>**TRUST INDENTURE ACT CROSS REFERENCE TABLE**</u>

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| | |
|:---|:---|
| **<u>Trust Indenture Act</u> <br> <u>Section</u>** | **<u>Indenture Section</u>** |
| 310 (a)(1) | 6.11 |
| (a)(2) | 6.11 |
| (a)(3) | 6.10(b)(i) |
| (a)(4) | Not applicable |
| (a)(5) | 6.11 |
| (b) | 6.11 |
| 311 (a) | 6.12 |
| (b) | 6.12 |
| 312 (a) | 7.01 and 7.02 |
| (b) | 7.02(b) |
| (c) | 7.02(c) |
| 313 (a) | 7.04 |
| (b)(1) | 7.04 |
| (b)(2) | 7.04 |
| (c) | 7.03(a) and 7.04 |
| (d) | Not applicable |
| 314 (a) | 3.09, 4.01 and 7.03(a) |
| (b) | 3.06 and 4.01 |
| (c)(1) | 2.10, 4.01, 8.04(b) and 10.01(a) |
| (c)(2) | 2.10, 4.01, 8.04(b) and 10.01(a) |
| (c)(3) | 2.10, 4.01, and 10.01(a) |
| (d) | 8.04(b) and 10.01 |
| (e) | 10.01(a) |
| (f) | 10.01(a) |
| 315 (a) | 6.01(b)(i) and 6.01(b)(ii) |

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| | | |
|:---|:---|:---|
| **<u>Trust Indenture Act</u> <br> <u>Section</u>** | **<u>Trust Indenture Act</u> <br> <u>Section</u>** | **<u>Indenture Section</u>** |
|  | (b) | 6.05 |
|  | (c) | 6.01(a) |
|  | (d) | 6.01(c)(i), 6.01(c)(ii) and 6.01(c)(iii) |
|  | (e) | 5.13 |
| 316 | (a) (last sentence) | Appendix A – definition of "Outstanding" |
|  | (a)(1)(A) | 5.11 |
|  | (a)(1)(B) | 5.12 |
|  | (a)(2) | Not applicable |
|  | (b) | 5.07 |
|  | (c) | Appendix A – definition of "Record Date" |
| 317 | (a)(1) | 5.03(a) |
|  | (a)(2) | 5.03(c)(iv) |
|  | (b) | 3.03 |
| 318 | (a) | 10.06 |
|  | (b) | 10.06 |
|  | (c) | 10.06 |

---

This cross reference table shall not, for any purpose, be deemed to be part of this Indenture.

This INDENTURE, dated as of [Closing Date], 2025, is by and among DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, a Delaware limited liability company, and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, in its capacity as trustee for the benefit of the Secured Parties and U.S. BANK NATIONAL ASSOCIATION, in its capacity as a securities intermediary and account bank.

In consideration of the mutual agreements herein contained, each party hereto agrees as follows for the benefit of the other party hereto and each of the Holders:

RECITALS OF THE ISSUER

The Issuer has duly authorized the execution and delivery of this Indenture and the creation and issuance of Storm Recovery Bonds issuable hereunder, which will be of substantially the tenor set forth in the Series Supplement to this Indenture duly executed and delivered by the Issuer and the Indenture Trustee.

Storm Recovery Bonds shall be non-recourse obligations and shall be secured by and payable solely out of the proceeds of the Storm Recovery Property and the other Storm Recovery Collateral as provided herein. If and to the extent that such proceeds of the Storm Recovery Property and the other Storm Recovery Collateral are insufficient to pay all amounts owing with respect to the Storm Recovery Bonds, then, except as otherwise expressly provided hereunder, the Holders shall have no Claim in respect of such insufficiency against the Issuer or the Indenture Trustee, and the Holders, by their acceptance of the Storm Recovery Bonds, waive any such Claim.

All things necessary to (a) make the Storm Recovery Bonds, when executed by the Issuer and authenticated and delivered by the Indenture Trustee hereunder and duly issued by the Issuer, valid obligations, and (b) make this Indenture a valid agreement of the Issuer, in each case, in accordance with their respective terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

That the Issuer, in consideration of the premises herein contained and of the purchase of Storm Recovery Bonds by the Holders and of other good and lawful consideration, the receipt and sufficiency of which are hereby acknowledged, and to secure, equally and ratably without prejudice, priority or distinction, except as specifically otherwise set forth in this Indenture, the payment of the Storm Recovery Bonds, the payment of all other amounts due under or in connection with this Indenture (including all fees, expenses, counsel fees and other amounts due and owing to the Indenture Trustee) and the performance and observance of all of the covenants and conditions contained herein or in the Storm Recovery Bonds, has hereby executed and delivered this Indenture and by these presents does hereby and by the Series Supplement will convey, grant, assign, transfer and pledge, in each case, in and unto the Indenture Trustee, its successors and assigns forever, for the benefit of the Secured Parties, all and singular the property described in the Series Supplement(such property herein referred to as "Storm Recovery Collateral" or "Collateral."

AND IT IS HEREBY COVENANTED, DECLARED AND AGREED between the parties hereto that all Storm Recovery Bonds are to be issued, countersigned and delivered and that all of the Collateral is to be held and applied, subject to the further covenants, conditions, releases, uses and trusts hereinafter set forth, and the Issuer, for itself and any successor, does hereby covenant and agree to and with the Indenture Trustee and its successors in said trust, for the benefit of the Secured Parties, as follows:

ARTICLE I

Definitions AND RULES OF CONSTRUCTION; Incorporation by Reference

SECTION 1.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Definitions and Rules of Construction</u>. Capitalized terms used but not otherwise defined in this Indenture shall have the respective meanings given to such terms in <u>Appendix A</u>, which is hereby incorporated by reference into this Indenture as if set forth fully in this Indenture. Not all terms defined in <u>Appendix A</u> are used in this Indenture. The rules of construction set forth in <u>Appendix A</u> shall apply to this Indenture and are hereby incorporated by reference into this Indenture as if set forth fully in this Indenture.

SECTION 1.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Incorporation by Reference of Trust Indenture Act</u>. Whenever this Indenture refers to a provision of the Trust Indenture Act, that provision is incorporated by reference in and made a part of this Indenture. Certain Trust Indenture Act terms have been defined in this Indenture as follows:

"indenture securities" means the Storm Recovery Bonds.

"indenture security holder" means a Holder.

"indenture to be qualified" means this Indenture.

"indenture trustee" or "institutional trustee" means the Indenture Trustee.

"obligor" on the indenture securities means the Issuer and any other obligor on the indenture securities.

All other Trust Indenture Act terms used in this Indenture that are defined by the Trust Indenture Act, defined by Trust Indenture Act reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions.

ARTICLE II

The Storm Recovery Bonds

SECTION 2.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Form</u>. The Storm Recovery Bonds and the Indenture Trustee's certificate of authentication shall be in substantially the forms set forth in <u>Exhibit A</u>, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted by this Indenture or by the related Series Supplement and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may, consistently herewith, be determined by the officers executing the Storm Recovery Bonds, as evidenced by their execution of the Storm Recovery Bonds.

The Storm Recovery Bonds shall be typewritten, printed, lithographed or engraved or produced by any combination of these methods (with or without steel engraved borders), all as determined by the officers executing the Storm Recovery Bonds, as evidenced by their execution of the Storm Recovery Bonds.

Each Storm Recovery Bond shall be dated the date of its authentication.

SECTION 2.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Denominations: Storm Recovery Bonds</u>. The Storm Recovery Bonds shall be issuable in the Authorized Denominations specified in the Series Supplement.

The Storm Recovery Bonds shall, at the election of and as authorized by a Responsible Officer of the Issuer, and set forth in the Series Supplement, be issued in one or more Tranches, and shall be designated generally as the "Series A Senior Secured Storm Recovery Bonds" of the Issuer, with such further particular designations added or incorporated in such title for the Storm Recovery Bonds of any particular Tranche as a Responsible Officer of the Issuer may determine. All Storm Recovery Bonds shall be identical in all respects except for the denominations thereof, the Holder thereof, the numbering thereon and the legends thereon, unless such Storm Recovery Bonds are comprised of one or more Tranches, in which case all of such Storm Recovery Bonds of the same Tranche shall be identical in all respects except for the denominations thereof, the Holder thereof, the numbering thereon, the legends thereon and the CUSIP number thereon. All Storm Recovery Bonds and of a particular Tranche shall be in all respects equally and ratably entitled to the benefits hereof without preference, priority or distinction on account of the actual time or times of authentication and delivery, all in accordance with the terms and provisions of this Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; designation of the Tranches thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; the principal amount of each Tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; the Bond Interest Rate of each tranche thereof or the formula, if any, used to calculate Bond Interest Rate or Bond Interest Rates for each Tranche thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; the Payment Dates for each Tranche thereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; the Scheduled Payment Dates for each Tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; the Scheduled Final Payment Date of each Tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; the Final Maturity Date of each Tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; the issuance date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the Authorized Denominations;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp; the Expected Sinking Fund Schedule of each Tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp; the place or places for the payment of interest, principal and premium, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp; any additional Secured Parties;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp; the identity of the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp; the Storm Recovery Charges and the Storm Recovery Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;&nbsp; whether or not the Storm Recovery Bonds are to be Book-Entry Storm Recovery Bonds and the extent to which <u>Section 2.11</u> should apply; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;&nbsp; any other terms of the Storm Recovery Bonds (or Tranches thereof) that are not inconsistent with the provisions of this Indenture and as to which the Rating Agency Condition is satisfied.

SECTION 2.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Execution, Authentication and Delivery</u>. The Storm Recovery Bonds shall be executed on behalf of the Issuer by any of its Responsible Officers. The signature of any such Responsible Officer on the Storm Recovery Bonds may be manual, electronic or facsimile.

Storm Recovery Bonds bearing the manual, electronic or facsimile signature of individuals who were at any time Responsible Officers of the Issuer shall bind the Issuer, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of the Storm Recovery Bonds or did not hold such offices at the date of the Storm Recovery Bonds.

At any time and from time to time after the execution and delivery of this Indenture, the Issuer may deliver Storm Recovery Bonds executed by the Issuer to the Indenture Trustee pursuant to an Issuer Order for authentication; and the Indenture Trustee shall authenticate and deliver the Storm Recovery Bonds as in this Indenture provided and not otherwise.

No Storm Recovery Bond shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose, unless there appears on such Storm Recovery Bond a certificate of authentication substantially in the form provided for therein executed by the Indenture Trustee by the manual, electronic or facsimile signature of one of its authorized signatories, and such certificate upon any Storm Recovery Bond shall be conclusive evidence, and the only evidence, that such Storm Recovery Bond has been duly authenticated and delivered hereunder.

The words "execution," signed," signature," and words of like import in this Indenture shall include images of manually executed signatures transmitted by facsimile, email or other electronic format (including, without limitation, "pdf," "tif" or "jpg") and other electronic signatures (including without limitation, DocuSign and AdobeSign). The use of electronic signatures and electronic records (including, without limitation, any contract or other record created, generated, sent, communicated, received, or stored by electronic means) shall be of the same legal effect, validity and enforceability as a manually executed signature or use of a paper-based record-keeping system to the fullest extent permitted by applicable law, including the Federal Electronic Signatures in Global and National Commerce Act, the New York State Electronic Signatures and Records Act and any other applicable law, including, without limitation, any state law based on the Uniform Electronic Transactions Act or the Uniform Commercial Code.

SECTION 2.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Temporary Storm Recovery Bonds</u>. Pending the preparation of Definitive Storm Recovery Bonds pursuant to <u>Section 2.13</u>, the Issuer may execute, and upon receipt of an Issuer Order the Indenture Trustee shall authenticate and deliver, Temporary Storm Recovery Bonds that are printed, lithographed, typewritten, mimeographed or otherwise produced, of the tenor of the Definitive Storm Recovery Bonds in lieu of which they are issued and with such variations not inconsistent with the terms of this Indenture and the related Series Supplement as the officers executing the Storm Recovery Bonds may determine, as evidenced by their execution of the Storm Recovery Bonds.

If Temporary Storm Recovery Bonds are issued, the Issuer will cause Definitive Storm Recovery Bonds to be prepared without unreasonable delay. After the preparation of Definitive Storm Recovery Bonds, the Temporary Storm Recovery Bonds shall be exchangeable for Definitive Storm Recovery Bonds upon surrender of the Temporary Storm Recovery Bonds at the office or agency of the Issuer to be maintained as provided in <u>Section 3.02</u>, without charge to the Holder. Upon surrender for cancellation of any one or more Temporary Storm Recovery Bonds, the Issuer shall execute and the Indenture Trustee shall authenticate and deliver in exchange therefor a like principal amount of Definitive Storm Recovery Bonds of authorized denominations. Until so delivered in exchange, the Temporary Storm Recovery Bonds shall in all respects be entitled to the same benefits under this Indenture as Definitive Storm Recovery Bonds.

SECTION 2.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Registration; Registration of Transfer and Exchange of Storm Recovery Bonds</u>. The Issuer shall cause to be kept a register (the "<u>Storm Recovery Bond Register</u>") in which, subject to such reasonable regulations as it may prescribe, the Issuer shall provide for the registration of Storm Recovery Bonds and the registration of transfers of Storm Recovery Bonds. U.S. Bank Trust Company, National Association shall be "<u>Storm Recovery Bond Registrar</u>" for the purpose of registering the Storm Recovery Bonds and transfers of Storm Recovery Bonds as herein provided. Upon any resignation of any Storm Recovery Bond Registrar, the Issuer shall promptly appoint a successor or, if it elects not to make such an appointment, assume the duties of Storm Recovery Bond Registrar.

If a Person other than the Indenture Trustee is appointed by the Issuer as Storm Recovery Bond Registrar, the Issuer will give the Indenture Trustee prompt written notice of the appointment of such Storm Recovery Bond Registrar and of the location, and any change in the location, of the Storm Recovery Bond Register, and the Indenture Trustee shall have the right to inspect the Storm Recovery Bond Register at all reasonable times and to obtain copies thereof, and the Indenture Trustee shall have the right to rely conclusively upon a certificate executed on behalf of the Storm Recovery Bond Registrar by a Responsible Officer thereof as to the names and addresses of the Holders and the principal amounts and number of the Storm Recovery Bonds (separately stated by Tranche).

Upon surrender for registration of transfer of any Storm Recovery Bond at the office or agency of the Issuer to be maintained as provided in <u>Section 3.02</u>, provided that the requirements of Section 8-401 of the UCC are met, the Issuer shall execute, and the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, in the name of the designated transferee or transferees, one or more new Storm Recovery Bonds, in any Authorized Denominations, of the same Tranche and aggregate principal amount.

At the option of the Holder, Storm Recovery Bonds may be exchanged for other Storm Recovery Bonds, in any Authorized Denominations, of the same Tranche and aggregate principal amount, upon surrender of the Storm Recovery Bonds to be exchanged at such office or agency as provided in <u>Section 3.02</u>. Whenever any Storm Recovery Bonds are so surrendered for exchange, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon any such execution, the Indenture Trustee shall authenticate and the Holder shall obtain from the Indenture Trustee, the Storm Recovery Bonds that the Holder making the exchange is entitled to receive.

All Storm Recovery Bonds issued upon any registration of transfer or exchange of other Storm Recovery Bonds shall be the valid obligations of the Issuer, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Storm Recovery Bonds surrendered upon such registration of transfer or exchange.

Every Storm Recovery Bond presented or surrendered for registration of transfer or exchange shall be duly endorsed by, or be accompanied by: (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder thereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee; and (b) such other documents as the Indenture Trustee may require.

Each transferee of Storm Recovery Bond in definitive form that is presented for registration will be required to represent and warrant (or in the case of a Storm Recovery Bond held in Book-Entry Form will be deemed to represent and warrant by virtue of its acquisition of the Storm Recovery Bond) on each day from and including the date of its acquisition of the Storm Recovery Bond through and including the date of disposition of any such Storm Recovery Bond that either (i) it is not and is not acting on behalf of, or using plan assets of, (a) a Plan or any governmental, church or non-U.S. plan that is subject to any Similar Law or (ii) its acquisition, holding and disposition of the Storm Recovery Bond, in the case of a Plan, will not constitute or result in a non-exempt prohibited transaction in violation of Section 406 of ERISA or Section 4975 of the Code or, in the case of a governmental, church or non-U.S. plan subject to Similar Law, will not result in or constitute a violation of such Similar Law.

No service charge shall be made to a Holder for any registration of transfer or exchange of Storm Recovery Bonds, but the Issuer or the Indenture Trustee may require payment of a sum sufficient to cover any tax or other governmental charge or any fees or expenses of the Indenture Trustee that may be imposed in connection with any registration of transfer or exchange of Storm Recovery Bonds, other than exchanges pursuant to <u>Section 2.04</u> or <u>Section 2.06</u> not involving any transfer.

The preceding provisions of this <u>Section 2.05</u> notwithstanding, the Issuer shall not be required to make, and the Storm Recovery Bond Registrar need not register, transfers or exchanges of any Storm Recovery Bond that has been submitted within 15 days preceding the due date for any payment with respect to such Storm Recovery Bond until after such due date has occurred.

SECTION 2.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Mutilated, Destroyed, Lost or Stolen Storm Recovery Bonds</u>. If (a) any mutilated Storm Recovery Bond is surrendered to the Indenture Trustee or the Indenture Trustee receives evidence to its satisfaction of the destruction, loss or theft of any Storm Recovery Bond and (b) there is delivered to the Indenture Trustee such security or indemnity as may be required by it to hold the Issuer and the Indenture Trustee harmless, then, in the absence of notice to the Issuer, the Storm Recovery Bond Registrar or the Indenture Trustee that such Storm Recovery Bond has been acquired by a Protected Purchaser, the Issuer shall, provided that the requirements of Section 8-401 of the UCC are met, execute, and, upon the Issuer's written request, the Indenture Trustee shall authenticate and deliver, in exchange for or in lieu of any such mutilated, destroyed, lost or stolen Storm Recovery Bond, a replacement Storm Recovery Bond of like Tranche and principal amount, bearing a number not contemporaneously outstanding; <u>provided</u>, <u>however</u>, that, if any such destroyed, lost or stolen Storm Recovery Bond, but not a mutilated Storm Recovery Bond, shall have become or within seven days shall be due and payable, instead of issuing a replacement Storm Recovery Bond, the Issuer may pay such destroyed, lost or stolen Storm Recovery Bond when so due or payable without surrender thereof. If, after the delivery of such replacement Storm Recovery Bond or payment of a destroyed, lost or stolen Storm Recovery Bond pursuant to the proviso to the preceding sentence, a Protected Purchaser of the original Storm Recovery Bond in lieu of which such replacement Storm Recovery Bond was issued presents for payment such original Storm Recovery Bond, the Issuer and the Indenture Trustee shall be entitled to recover such replacement Storm Recovery Bond (or such payment) from the Person to whom it was delivered or any Person taking such replacement Storm Recovery Bond from such Person to whom such replacement Storm Recovery Bond was delivered or any assignee of such Person, except a Protected Purchaser, and shall be entitled to recover upon the security or indemnity provided therefor to the extent of any loss, damage, cost or expense incurred by the Issuer or the Indenture Trustee in connection therewith.

Upon the issuance of any replacement Storm Recovery Bond under this <u>Section 2.06</u>, the Issuer and/or the Indenture Trustee may require the payment by the Holder of such Storm Recovery Bond of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other reasonable expenses (including the fees and expenses of the Indenture Trustee and the Storm Recovery Bond Registrar) in connection therewith.

Every replacement Storm Recovery Bond issued pursuant to this <u>Section 2.06</u> in replacement of any mutilated, destroyed, lost or stolen Storm Recovery Bond shall constitute an original additional contractual obligation of the Issuer, whether or not the mutilated, destroyed, lost or stolen Storm Recovery Bond shall be found at any time or enforced by any Person, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Storm Recovery Bonds duly issued hereunder.

The provisions of this <u>Section 2.06</u> are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Storm Recovery Bonds.

SECTION 2.07.&nbsp;&nbsp;&nbsp;&nbsp; <u>Persons Deemed Owner</u>. Prior to due presentment for registration of transfer of any Storm Recovery Bond, the Issuer, the Indenture Trustee, the Storm Recovery Bond Registrar and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name any Storm Recovery Bond is registered (as of the day of determination) as the owner of such Storm Recovery Bond for the purpose of receiving payments of principal of and premium, if any, and interest on such Storm Recovery Bond and for all other purposes whatsoever, whether or not such Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or any agent of the Issuer or the Indenture Trustee shall be affected by notice to the contrary.

SECTION 2.08.&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment of Principal, Premium, if any, and Interest; Interest on Overdue Principal; Principal, Premium, if any, and Interest Rights Preserved</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Storm Recovery Bonds shall accrue interest as provided in applicable Series Supplement at the applicable Bond Interest Rate, and such interest shall be payable on each applicable Payment Date. Any installment of interest, principal or premium, if any, payable on any Storm Recovery Bond that is punctually paid or duly provided for on the applicable Payment Date shall be paid to the Person in whose name such Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) is registered on the Record Date for the applicable Payment Date by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder (or by wire transfer to an account maintained by such Holder) in accordance with payment instructions delivered to the Indenture Trustee by such Holder, and, with respect to Book-Entry Storm Recovery Bonds, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to such Storm Recovery Bond on a Payment Date, which shall be payable as provided below.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The principal of each Storm Recovery Bond of each Tranche shall be paid, to the extent funds are available therefor in the Collection Account, in installments on each Payment Date specified in the Series Supplement; <u>provided</u>, that installments of principal not paid when scheduled to be paid in accordance with the Expected Sinking Fund Schedule shall be paid upon receipt of money available for such purpose, in the order set forth in the Expected Sinking Fund Schedule. Failure to pay principal in accordance with such Expected Sinking Fund Schedule because moneys are not available pursuant to <u>Section 8.02</u> to make such payments shall not constitute a Default or Event of Default under this Indenture; <u>provided</u>, <u>however</u>, that failure to pay the entire unpaid principal amount of the Storm Recovery Bonds of a Tranche upon the Final Maturity Date for the Storm Recovery Bonds of such Tranche shall constitute an Event of Default under this Indenture as set forth in <u>Section 5.01</u>. Notwithstanding the foregoing, the entire unpaid principal amount of the Storm Recovery Bonds shall be due and payable, if not previously paid, on the date on which an Event of Default shall have occurred and be continuing, if the Indenture Trustee or the Holders of Storm Recovery Bonds representing a majority of the Outstanding Amount of Storm Recovery Bonds have declared such Storm Recovery Bonds to be immediately due and payable in the manner provided in <u>Section 5.02</u>. All payments of principal and premium, if any, on such Storm Recovery Bonds shall be made pro rata to the Holders entitled thereto unless otherwise provided in the Series Supplement. The Indenture Trustee shall notify the Person in whose name a Storm Recovery Bond is registered at the close of business on the Record Date preceding the Payment Date on which the Issuer expects that the final installment of principal of and premium, if any, and interest on such Storm Recovery Bond will be paid. Such notice shall be mailed no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of such Storm Recovery Bond and shall specify the place where such Storm Recovery Bond may be presented and surrendered for payment of such installment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; If interest on the Storm Recovery Bonds is not paid when due, such defaulted interest shall be paid (plus interest on such defaulted interest at the applicable Bond Interest Rate to the extent lawful) to the Persons who are Holders on a subsequent Special Record Date, which date shall be at least 15 Business Days prior to the Special Payment Date. The Issuer shall fix or cause to be fixed any such Special Record Date and Special Payment Date, and, at least ten days before any such Special Record Date, the Issuer shall mail to each affected Holder a notice that states the Special Record Date, the Special Payment Date and the amount of defaulted interest (plus interest on such defaulted interest) to be paid.

SECTION 2.09.&nbsp;&nbsp;&nbsp;&nbsp; <u>Cancellation</u>. All Storm Recovery Bonds surrendered for payment, registration of transfer or exchange shall, if surrendered to any Person other than the Indenture Trustee, be delivered to the Indenture Trustee and shall be promptly canceled by the Indenture Trustee. The Issuer may at any time deliver to the Indenture Trustee for cancellation any Storm Recovery Bonds previously authenticated and delivered hereunder that the Issuer may have acquired in any manner whatsoever, and all Storm Recovery Bonds so delivered shall be promptly canceled by the Indenture Trustee. No Storm Recovery Bonds shall be authenticated in lieu of or in exchange for any Storm Recovery Bonds canceled as provided in this <u>Section 2.09</u>, except as expressly permitted by this Indenture. All canceled Storm Recovery Bonds may be held or disposed of by the Indenture Trustee in accordance with its standard retention or disposal policy as in effect at the time.

SECTION 2.10.&nbsp;&nbsp;&nbsp;&nbsp; <u>Outstanding Amount; Authentication and Delivery of Storm Recovery Bonds</u>. The aggregate Outstanding Amount of Storm Recovery Bonds that may be authenticated and delivered under this Indenture shall not exceed the aggregate of the amount of Storm Recovery Bonds that are authorized in the Financing Order, but otherwise shall be unlimited.

Storm Recovery Bonds may at any time be executed by the Issuer and delivered to the Indenture Trustee for authentication and thereupon the same shall be authenticated and delivered by the Indenture Trustee upon Issuer Request and upon delivery by the Issuer to the Indenture Trustee of the following (and if applicable, subject further to the requirements of <u>Section 3.21</u>):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; <u>Issuer Action</u>. An Issuer Order authorizing and directing the authentication and delivery of the Storm Recovery Bonds by the Indenture Trustee and specifying the principal amount of Storm Recovery Bonds to be authenticated.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; <u>Authorizations</u>. Copies of (i) the Financing Order, which shall be in full force and effect and be Final, (ii) certified resolutions of the Managers or Member of the Issuer authorizing the execution and delivery of the Series Supplement and the execution, authentication and delivery of the Storm Recovery Bonds and (iii) a Series Supplement duly executed by the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; <u>Authorizing Certificate</u>. An Officer's Certificate, dated the Closing Date, of the Issuer certifying that (i) the Issuer has duly authorized the execution and delivery of this Indenture and the related Series Supplement and the execution and delivery of the Series of Storm Recovery Bonds and (ii) the Series Supplement is in the form attached thereto and complies with the requirements of <u>Section 2.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; <u>The Storm Recovery Collateral</u>. The Issuer shall have made or caused to be made all filings with the Commission and the Secretary of State of the State of North Carolina pursuant to the Financing Order and the Storm Recovery Law and all other filings necessary to perfect the Grant of the Storm Recovery Collateral to the Indenture Trustee and the Lien of this Indenture and the Series Supplement, including but not limited to UCC financing statements in Delaware or North Carolina as applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; <u>Certificates of the Issuer and the Seller</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; An Officer's Certificate from the Issuer, dated as of the Closing Date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;&nbsp;&nbsp; to the effect that (1) the Issuer is not in Default under this Indenture and that the issuance of the Storm Recovery Bonds will not result in any Default or in any breach of any of the terms, conditions or provisions of or constitute a default under the Financing Order or any indenture, mortgage, deed of trust or other agreement or instrument to which the Issuer is a party or by which it or its property is bound or any order of any court or administrative agency entered in any Proceeding to which the Issuer is a party or by which it or its property may be bound or to which it or its property may be subject and (2) all conditions precedent provided in this Indenture relating to the execution, authentication and delivery of the Storm Recovery Bonds have been complied with;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;&nbsp;&nbsp; to the effect that: the Issuer has not assigned any interest or participation in the Storm Recovery Collateral except for the Grant contained in this Indenture and the Series Supplement; the Issuer has the power and right to Grant the Storm Recovery Collateral to the Indenture Trustee as security hereunder and thereunder; and the Issuer, subject to the terms of this Indenture, has Granted to the Indenture Trustee a first priority perfected security interest in all of its right, title and interest in and to such Storm Recovery Collateral free and clear of any Lien arising as a result of actions of the Issuer or through the Issuer, except Permitted Liens;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;&nbsp;&nbsp;&nbsp; to the effect that the Issuer has appointed the firm of Independent registered public accountants as contemplated in <u>Section 8.06</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D)&nbsp;&nbsp;&nbsp;&nbsp; to the effect that the respective Sale Agreement, Servicing Agreement, Administration Agreement and Intercreditor Agreements are, to the knowledge of the Issuer (and assuming such agreements are enforceable against all parties thereto other than the Issuer and Duke Energy Carolinas), in full force and effect and, to the knowledge of the Issuer, that no party is in default of its obligations under such agreements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E)&nbsp;&nbsp;&nbsp;&nbsp; certifying that the Storm Recovery Bonds have received the ratings from the Rating Agencies if required by the Underwriting Agreement as a condition to the issuance of such Storm Recovery Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F)&nbsp;&nbsp;&nbsp;&nbsp; stating that (i) all conditions precedent provided for in this Indenture relating to (a) the authentication and delivery of the Issuer's Storm Recovery Bonds, and (b) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture, have been compiled with, (ii) the execution of the Series Supplement to this Indenture dated as of the date of this Indenture is authorized or permitted by this Indenture, and (iii) the Issuer has delivered the documents required under this Section 2.10 and has otherwise satisfied the requirements set out in this Section 2.10, including, but not limited to, complying with Section 2.10(f)(i) hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp; An officer's certificate from the Seller, dated as of the Closing Date, to the effect that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;&nbsp;&nbsp; in the case of the Storm Recovery Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement: the Seller was the original and the sole owner of such Storm Recovery Property, free and clear of any Lien; the Seller had not assigned any interest or participation in such Storm Recovery Property and the proceeds thereof other than to the Issuer pursuant to the Sale Agreement; the Seller has the power, authority and right to own, sell and assign such Storm Recovery Property and the proceeds thereof to the Issuer; the Seller has its chief executive office in the State of North Carolina; and the Seller, subject to the terms of the Sale Agreement, has validly sold and assigned to the Issuer all of its right, title and interest in and to such Storm Recovery Property and the proceeds thereof, free and clear of any Lien (other than Permitted Liens) and such sale and assignment is absolute and irrevocable and has been perfected;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;&nbsp;&nbsp; in the case of the Storm Recovery Property identified in the Bill of Sale, immediately prior to the conveyance thereof to the Issuer pursuant to the Sale Agreement, the attached copy of the Financing Order, creating such Storm Recovery Property is true and complete and is in full force and effect; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C)&nbsp;&nbsp;&nbsp;&nbsp; the Required Capital Level has been deposited or caused to be deposited by the Seller with the Indenture Trustee for crediting to the Capital Subaccount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; [RESERVED]

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; <u>Requirements of Series Supplement</u>. Such other funds, accounts, documents, certificates, agreements, instruments or opinions as may be required by the terms of the Series Supplement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; <u>Other Requirements</u>. Such other documents, certificates, agreements, instruments or opinions as the Indenture Trustee may reasonably require.

SECTION 2.11.&nbsp;&nbsp;&nbsp;&nbsp; <u>Book-Entry Storm Recovery Bonds</u>. Unless the Series Supplement provides otherwise, all of the Storm Recovery Bonds shall be issued in Book-Entry Form, and the Issuer shall execute and the Indenture Trustee shall, in accordance with this <u>Section 2.11</u> and the Issuer Order, authenticate and deliver one or more Global Storm Recovery Bonds, evidencing the Storm Recovery Bonds, which (a) shall be an aggregate original principal amount equal to the aggregate original principal amount of the Storm Recovery Bonds to be issued pursuant to the Issuer Order, (b) shall be registered in the name of the Clearing Agency therefor or its nominee, which shall initially be Cede & Co., as nominee for The Depository Trust Company, the initial Clearing Agency, (c) shall be delivered by the Indenture Trustee pursuant to such Clearing Agency's or such nominee's instructions and (d) shall bear a legend substantially to the effect set forth in <u>Exhibit A</u> to the Form of Series Supplement.

Each Clearing Agency designated pursuant to this <u>Section 2.11</u> must, at the time of its designation and at all times while it serves as Clearing Agency hereunder, be a "clearing agency" registered under the Exchange Act and any other applicable statute or regulation.

No Holder of Storm Recovery Bonds issued in Book-Entry Form shall receive a Definitive Storm Recovery Bond representing such Holder's interest in any of the Storm Recovery Bonds, except as provided in <u>Section 2.13</u>. Unless (and until) certificated, fully registered Storm Recovery Bonds (the "<u>Definitive Storm Recovery Bonds</u>") have been issued to the Holders pursuant to <u>Section 2.13</u> or pursuant to the Series Supplement relating thereto:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the provisions of this <u>Section 2.11</u> shall be in full force and effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp; the Issuer, the Servicer, the Paying Agent, the Storm Recovery Bond Registrar and the Indenture Trustee may deal with the Clearing Agency for all purposes (including the making of distributions on the Storm Recovery Bonds and the giving of instructions or directions hereunder) as the authorized representative of the Holders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp; to the extent that the provisions of this <u>Section 2.11</u> conflict with any other provisions of this Indenture, the provisions of this <u>Section 2.11</u> shall control;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp; the rights of Holders shall be exercised only through the Clearing Agency and the Clearing Agency Participants and shall be limited to those established by law and agreements between such Holders and the Clearing Agency and/or the Clearing Agency Participants. Pursuant to the Letter of Representations, unless and until Definitive Storm Recovery Bonds are issued pursuant to <u>Section 2.13</u>, the initial Clearing Agency will make book-entry transfers among the Clearing Agency Participants and receive and transmit distributions of principal of and interest on the Book-Entry Storm Recovery Bonds to such Clearing Agency Participants; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp; whenever this Indenture requires or permits actions to be taken based upon instruction or directions of the Holders evidencing a specified percentage of the Outstanding Amount of Storm Recovery Bonds, the Clearing Agency shall be deemed to represent such percentage only to the extent that it has received instructions to such effect from the Holders and/or the Clearing Agency Participants owning or representing, respectively, such required percentage of the beneficial interest in the Storm Recovery Bonds and has delivered such instructions to a Responsible Officer of the Indenture Trustee.

SECTION 2.12.&nbsp;&nbsp;&nbsp;&nbsp; <u>Notices to Clearing Agency</u>. Unless and until Definitive Storm Recovery Bonds shall have been issued to Holders pursuant to <u>Section 2.13</u>, whenever notice, payment or other communications to the holders of Book-Entry Storm Recovery Bonds is required under this Indenture, the Indenture Trustee, the Servicer and the Paying Agent, as applicable, shall make all such payments to, and give all such notices and communications specified herein, to the Clearing Agency.

SECTION 2.13.&nbsp;&nbsp;&nbsp;&nbsp; <u>Definitive Storm Recovery Bonds</u>. If (a) (i) the Issuer advises the Indenture Trustee in writing that the Clearing Agency is no longer willing or able to properly discharge its responsibilities under any Letter of Representations and (ii) the Issuer is unable to locate a qualified successor Clearing Agency, (b) the Issuer, at its option, advises the Indenture Trustee in writing that it elects to terminate the book-entry system through the Clearing Agency or (c) after the occurrence of an Event of Default hereunder, Holders holding Storm Recovery Bonds aggregating a majority of the aggregate Outstanding Amount of Storm Recovery Bonds maintained as Book-Entry Storm Recovery Bonds advise the Indenture Trustee, the Issuer and the Clearing Agency (through the Clearing Agency Participants) in writing that the continuation of a book-entry system through the Clearing Agency is no longer in the best interests of the Holders, the Issuer shall notify the Clearing Agency, the Indenture Trustee and all such Holders in writing of the occurrence of any such event and of the availability of Definitive Storm Recovery Bonds to the Holders requesting the same. Upon surrender to the Indenture Trustee of the Global Storm Recovery Bonds by the Clearing Agency accompanied by registration instructions from such Clearing Agency for registration, the Issuer shall execute, and the Indenture Trustee shall authenticate and deliver, Definitive Storm Recovery Bonds in accordance with the instructions of the Clearing Agency. None of the Issuer, the Storm Recovery Bond Registrar, the Paying Agent or the Indenture Trustee shall be liable for any delay in delivery of such instructions and may conclusively rely on, and shall be fully protected in relying on, such instructions. Upon the issuance of Definitive Storm Recovery Bonds, the Indenture Trustee shall recognize the Holders of the Definitive Storm Recovery Bonds as Holders hereunder without need for any consent or acknowledgement from the Holders.

Definitive Storm Recovery Bonds will be transferable and exchangeable at the offices of the Storm Recovery Bond Registrar.

SECTION 2.14.&nbsp;&nbsp;&nbsp;&nbsp; <u>CUSIP Number</u>. The Issuer in issuing any Storm Recovery Bonds may use a "CUSIP" number and, if so used, the Indenture Trustee shall use the CUSIP number provided to it by the Issuer in any notices to the Holders thereof as a convenience to such Holders; <u>provided</u>, that any such notice may state that no representation is made as to the correctness or accuracy of the CUSIP number printed in the notice or on the Storm Recovery Bonds and that reliance may be placed only on the other identification numbers printed on the Storm Recovery Bonds. The Issuer shall promptly notify the Indenture Trustee in writing of any change in the CUSIP number with respect to any Storm Recovery Bond.

SECTION 2.15.&nbsp;&nbsp;&nbsp;&nbsp; <u>Letter of Representations</u>. The Issuer shall comply with the terms of each Letter of Representations applicable to the Issuer.

SECTION 2.16.&nbsp;&nbsp;&nbsp;&nbsp; <u>Tax Treatment</u>. The Issuer and the Indenture Trustee, by entering into this Indenture, and the Holders and any Persons holding a beneficial interest in any Storm Recovery Bond, by acquiring any Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purposes of state, local and other taxes, the Storm Recovery Bonds qualify under applicable tax law as indebtedness of the Member secured by the respective Storm Recovery Collateral and (b) solely for the purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Storm Recovery Bonds are outstanding, agree to treat the Storm Recovery Bonds as indebtedness of the Member secured by the respective Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.

SECTION 2.17.&nbsp;&nbsp;&nbsp;&nbsp; <u>State Pledge</u>. Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k)(1)a. which make the Storm Recovery Charges imposed by the Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of the Storm Recovery Property or the security for the Storm Recovery Bonds or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the Holders, assignees, and other Financing Parties or (d) except as authorized under the Storm Recovery Law, reduce, alter, or impair Storm Recovery Charges that are to be imposed, collected, and remitted for the benefit of the Holders, the Indenture Trustee and other Financing Parties until any and all principal, interest, premium, Financing Costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the Storm Recovery Bonds have been paid and performed in full.

The Issuer hereby acknowledges that the purchase of any Storm Recovery Bond by a Holder or the purchase of any beneficial interest in a Storm Recovery Bond by any Person and the Indenture Trustee's obligations to perform hereunder are made in reliance on such agreement and pledge by the State of North Carolina.

SECTION 2.18.&nbsp;&nbsp;&nbsp;&nbsp; <u>Security Interests</u>. The Issuer hereby makes the following representations and warranties. Other than the security interests granted to the Indenture Trustee pursuant to this Indenture, the Issuer has not pledged, granted, sold, conveyed or otherwise assigned any interests or security interests in the Collateral and no security agreement, financing statement or equivalent security or Lien instrument listing the Issuer as debtor covering all or any part of the Collateral is on file or of record in any jurisdiction, except such as may have been filed, recorded or made by the Issuer in favor of the Indenture Trustee on behalf of the Secured Parties in connection with this Indenture. This Indenture constitute a valid and continuing lien on, and first priority perfected security interest in, the Storm Recovery Collateral in favor of the Indenture Trustee on behalf of the Secured Parties, which lien and security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. With respect to all Storm Recovery Collateral, this Indenture, together with the Series Supplement, creates a valid and continuing first priority perfected security interest (as defined in the UCC) in such related Storm Recovery Collateral, which security interest is prior to all other Liens and is enforceable as such as against creditors of and purchasers from the Issuer in accordance with its terms, except as such enforceability may be limited by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws affecting creditors' rights generally or by general equitable principles, whether considered in a proceeding at law or in equity and by an implied covenant of good faith and fair dealing. The Issuer has good and marketable title to the Collateral free and clear of any Lien of any Person other than Permitted Liens. All of the Collateral constitutes Property or accounts, deposit accounts, investment property or general intangibles (as each such term is defined in the UCC), except that proceeds of the Collateral may also take the form of instruments. The Issuer has taken, or caused the Servicer to take, all action necessary to perfect the security interest in the Storm Recovery Collateral granted to the Indenture Trustee, for the benefit of the Secured Parties. The Issuer has filed (or has caused the Servicer to file) all appropriate financing statements in the proper filing offices in the appropriate jurisdictions under applicable law in order to perfect the security interest in the Storm Recovery Collateral granted to the Indenture Trustee. The Issuer has not authorized the filing of and is not aware, after due inquiry, of any financing statements against the Issuer that include a description of the Collateral other than those filed in favor of the Indenture Trustee. The Issuer is not aware of any judgment or tax lien filings against the Issuer. The Collection Account (including all subaccounts thereof other than the Capital Subaccount) constitutes a "securities account" within the meaning of the UCC and the Capital Subaccount constitutes a "deposit account" within the meaning of the UCC. The Issuer has taken all steps necessary to cause the Securities Intermediary of each such securities account to identify in its records the Indenture Trustee as the Person having a security entitlement against the Securities Intermediary in such securities account, no Collection Account is in the name of any Person other than the Indenture Trustee, and the Issuer has not consented to the Securities Intermediary of the Collection Account to comply with entitlement orders of any Person other than the Indenture Trustee. All of the Collateral constituting investment property has been and will have been credited to the Collection Account or a subaccount thereof, and the Securities Intermediary for the Collection Account has agreed to treat all assets credited to the Collection Account (other than cash) as "financial assets" within the meaning of the UCC and cash will be allocated to the Capital Subaccount. Accordingly, the Indenture Trustee has a first priority perfected security interest in the Collection Account, all funds and financial assets on deposit therein, and all securities entitlements relating thereto. The representations and warranties set forth in this <u>Section 2.18</u> shall survive the execution and delivery of this Indenture and the issuance of any Storm Recovery Bonds, shall be deemed re-made on each date on which any funds in the Collection Account are distributed to the Issuer as provided in <u>Section 8.04</u> or otherwise released from the Lien of the Indenture and may not be waived by any party hereto except pursuant to a supplemental indenture executed in accordance with <u>Article IX</u> and as to which the Rating Agency Condition has been satisfied.

ARTICLE III

Covenants

SECTION 3.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment of Principal, Premium, if any, and Interest</u>. The principal of and premium, if any, and interest on the Storm Recovery Bonds shall be duly and punctually paid by the Issuer, or the Servicer on behalf of the Issuer, in accordance with the terms of the Storm Recovery Bonds and this Indenture and the Series Supplement; <u>provided</u>, that, except on a Final Maturity Date of a Tranche or upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default, the Issuer shall only be obligated to pay the principal of such Storm Recovery Bonds on each Payment Date therefor to the extent moneys are available for such payment pursuant to <u>Section 8.02</u>. Amounts properly withheld under the Code, the Treasury regulations promulgated thereunder or other tax laws by any Person from a payment to any Holder of interest or principal or premium, if any, shall be considered as having been paid by the Issuer to such Holder for all purposes of this Indenture.

SECTION 3.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Maintenance of Office or Agency</u>. The Issuer shall initially maintain in St. Paul, Minnesota an office or agency where Storm Recovery Bonds may be surrendered for registration of transfer or exchange. The Issuer shall give prompt written notice to the Indenture Trustee of the location, and of any change in the location, of any such office or agency. The Issuer hereby initially appoints the Indenture Trustee to serve as its agent for the foregoing purposes, and the Corporate Trust Office of the Indenture Trustee shall serve as the offices provided above in this <u>Section 3.02</u>. If at any time the Issuer shall fail to maintain any such office or agency or shall fail to furnish the Indenture Trustee with the address thereof, such surrenders may be made at the office of the Indenture Trustee located at the Corporate Trust Office, and the Issuer hereby appoints the Indenture Trustee as its agent to receive all such surrenders.

SECTION 3.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Money for Payments To Be Held in Trust</u>. As provided in <u>Section 8.02(a)</u>, all payments of amounts due and payable with respect to any Storm Recovery Bonds that are to be made from amounts withdrawn from the Collection Account pursuant to <u>Section 8.02(d)</u> shall be made on behalf of the Issuer by the Indenture Trustee or by another Paying Agent, and no amounts so withdrawn from the Collection Account for payments with respect to any Storm Recovery Bonds shall be paid over to the Issuer except as provided in this <u>Section 3.03</u> and <u>Section 8.02</u>.

Each Paying Agent shall meet the eligibility criteria set forth for any Indenture Trustee under <u>Section 6.11</u>. The Issuer will cause each Paying Agent other than the Indenture Trustee to execute and deliver to the Indenture Trustee an instrument in which such Paying Agent shall agree with the Indenture Trustee (and if the Indenture Trustee acts as Paying Agent, it hereby so agrees), subject to the provisions of this <u>Section 3.03</u>, that such Paying Agent will:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; hold all sums held by it for the payment of amounts due with respect to the Storm Recovery Bonds in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disposed of as herein provided and pay such sums to such Persons as herein provided;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; give the Indenture Trustee unless the Indenture Trustee is the Paying Agent, the Commission and the Rating Agencies written notice of any Default by the Issuer of which it has actual knowledge in the making of any payment required to be made with respect to the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; at any time during the continuance of any such Default, upon the written request of the Indenture Trustee, forthwith pay to the Indenture Trustee all sums so held in trust by such Paying Agent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; immediately, with notice to the Rating Agencies, resign as a Paying Agent and forthwith pay to the Indenture Trustee all sums held by it in trust for the payment of Storm Recovery Bonds if at any time the Paying Agent determines that it has ceased to meet the standards required to be met by a Paying Agent at the time of such determination; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; comply with all requirements of the Code, the Treasury regulations promulgated thereunder and other tax laws with respect to the withholding from any payments made by it on any Storm Recovery Bonds of any applicable withholding taxes imposed thereon and with respect to any applicable reporting requirements in connection therewith.

The Issuer may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, by Issuer Order direct any Paying Agent to pay to the Indenture Trustee all sums held in trust by such Paying Agent, such sums to be held by the Indenture Trustee upon the same trusts as those upon which the sums were held by such Paying Agent; and, upon such payment by any Paying Agent to the Indenture Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Subject to applicable laws with respect to escheatment of funds, any money held by the Indenture Trustee or any Paying Agent in trust for the payment of any amount due with respect to any Storm Recovery Bond and remaining unclaimed for two years after such amount has become due and payable shall be discharged from such trust and be paid to the Issuer upon receipt of an Issuer Request; and, subject to <u>Section 10.14</u>, the Holder of such Storm Recovery Bond shall thereafter, as an unsecured general creditor, look only to the Issuer for payment thereof (but only to the extent of the amounts so paid to the Issuer), and all liability of the Indenture Trustee or such Paying Agent with respect to such trust money shall thereupon cease; <u>provided</u>, <u>however</u>, that the Indenture Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Issuer, cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Issuer. The Indenture Trustee may also adopt and employ, at the written direction and expense of the Issuer, any other reasonable means of notification of such repayment (including mailing notice of such repayment to Holders whose right to or interest in moneys due and payable but not claimed is determinable from the records of the Indenture Trustee or of any Paying Agent, at the last address of record for each such Holder).

SECTION 3.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Existence</u>. The Issuer shall keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware (unless it becomes, or any successor Issuer hereunder is or becomes, organized under the laws of any other State or of the United States of America, in which case the Issuer will keep in full effect its existence, rights and franchises under the laws of such other jurisdiction) and will obtain and preserve its qualification to do business in each jurisdiction in which such qualification is or shall be necessary to protect the validity and enforceability of this Indenture, the other Basic Documents, the Storm Recovery Bonds, the Collateral and each other instrument or agreement referenced herein or therein.

SECTION 3.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Protection of Collateral</u>. The Issuer shall from time to time execute and deliver all such supplements and amendments hereto and all filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Financing Order or to the Storm Recovery Law and all financing statements, continuation statements, instruments of further assurance and other instruments, and shall take such other action necessary or advisable, to:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; maintain or preserve the Lien (and the priority thereof) of this Indenture and the Series Supplement or carry out more effectively the purposes hereof;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; perfect, publish notice of or protect the validity of any Grant made or to be made by this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; enforce any of the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; preserve and defend title to the Collateral and the rights of the Indenture Trustee and the Holders in such Collateral against the Claims of all Persons, including a challenge by any party to the validity or enforceability of the Financing Order, the Storm Recovery Property or any proceeding relating thereto and institute any action or proceeding necessary to compel performance by the Commission or the State of North Carolina of any of its obligations or duties under the Storm Recovery Law, the State Pledge, or the Financing Order; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; pay any and all taxes levied or assessed upon all or any part of the Collateral.

The Indenture Trustee is specifically permitted and authorized, but not required to file financing statements covering the Collateral, including financing statements that describe the Collateral as "all assets" or "all personal property" of the Issuer; provided, however, that such authorization shall not be deemed to be an obligation.

SECTION 3.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Opinions as to Collateral</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Prior to the effectiveness of any amendment to the Sale Agreement or the Servicing Agreement, the Issuer shall furnish to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer either (i) stating that, in the opinion of such counsel, all filings, including UCC financing statements and other filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law or the applicable Financing Order have been executed and filed that are necessary fully to preserve and protect the Lien of the Issuer and the Indenture Trustee in the Storm Recovery Property and the Storm Recovery Collateral, respectively, and the proceeds thereof, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (ii) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such Lien.

SECTION 3.07.&nbsp;&nbsp;&nbsp;&nbsp; <u>Performance of Obligations; Servicing; SEC Filings</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer (i) shall diligently pursue any and all actions to enforce its rights under each instrument or agreement included in the Collateral and (ii) shall not take any action and shall use its best efforts not to permit any action to be taken by others that would release any Person from any of such Person's covenants or obligations under any such instrument or agreement or that would result in the amendment, hypothecation, subordination, termination or discharge of, or impair the validity or effectiveness of, any such instrument or agreement, except, in each case, as expressly provided in this Indenture, the Series Supplement, the Sale Agreement, the Servicing Agreement, the Intercreditor Agreements or such other instrument or agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer may contract with other Persons selected with due care to assist it in performing its duties under this Indenture, and any performance of such duties by a Person identified to the Indenture Trustee herein or in an Officer's Certificate shall be deemed to be action taken by the Issuer. Initially, the Issuer has contracted with the Servicer to assist the Issuer in performing its duties under this Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall punctually perform and observe all of its obligations and agreements contained in this Indenture, the Series Supplement, the other Basic Documents and the instruments and agreements included in the Collateral, including filing or causing to be filed all filings with the Commission, the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law or the Financing Order, all UCC financing statements and all continuation statements required to be filed by it by the terms of this Indenture, the Series Supplement, the Sale Agreement and the Servicing Agreement in accordance with and within the time periods provided for herein and therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; If the Issuer shall have knowledge of the occurrence of a Servicer Default under the Servicing Agreement, the Issuer shall promptly give written notice thereof to the Indenture Trustee, the Commission and the Rating Agencies and shall specify in such notice the response or action, if any, the Issuer has taken or is taking with respect to such Servicer Default. If a Servicer Default shall arise from the failure of the Servicer to perform any of its duties or obligations under the Servicing Agreement with respect to the Storm Recovery Property, the Storm Recovery Collateral or the Storm Recovery Charges, the Issuer shall take all reasonable steps available to it to remedy such failure.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; As promptly as possible after the giving of notice of termination to the Servicer and the Rating Agencies of the Servicer's rights and powers pursuant to Section 7.01 of the Servicing Agreement, the Indenture Trustee shall, at the written direction either (a) of the Holders evidencing a majority of the Outstanding Amount of the Storm Recovery Bonds, or (b) of the Commission, appoint a successor Servicer (the "<u>Successor Servicer</u>"), and such Successor Servicer shall accept its appointment by a written assumption in a form acceptable to the Issuer. A Person shall qualify as a Successor Servicer only if such Person satisfies the requirements of the Servicing Agreement and the Intercreditor Agreements. If, within 30 days after the delivery of the notice referred to above, a new Servicer shall not have been appointed, the Indenture Trustee may petition the Commission or a court of competent jurisdiction to appoint a Successor Servicer. In connection with any such appointment, Duke Energy Carolinas may make such arrangements for the compensation of such Successor Servicer as it and such successor shall agree, subject to the limitations set forth in <u>Section 8.02</u> and in the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; Upon any termination of the Servicer's rights and powers pursuant to the Servicing Agreement, the Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies of such termination. As soon as a Successor Servicer is appointed, the Indenture Trustee shall notify the Issuer, the Holders and the Rating Agencies of such appointment, specifying in such notice the name and address of such Successor Servicer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall (or shall cause the Sponsor to) post on its website (which for this purpose may be the website of any direct or indirect parent company of the Issuer) and, to the extent consistent with the Issuer's and the Sponsor's obligations under applicable law, file with or furnish to the SEC in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the following information (other than any such information filed with the SEC and publicly available to investors unless the Issuer specifically requests such items to be posted) with respect to the Outstanding Storm Recovery Bonds, in each case to the extent such information is reasonably available to the Issuer:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; statements of any remittances of Storm Recovery Charges made to the Indenture Trustee (to be included in a Form 10-D or Form 10-K, or successor forms thereto);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;a statement reporting the balances in the Collection Account and in each subaccount of the Collection Account as of all Payment Dates (to be included on the next Form 10-D filed);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) each Semi-Annual Servicer's Certificate as required to be submitted pursuant to the Servicing Agreement (to be filed with a Form 10-D, Form 10-K or Form 8-K, or successor forms thereto);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) each Monthly Servicer's Certificate as required to be submitted pursuant to the Servicing Agreement;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;the text (or a link to the website where a reader can find the text) of each filing of a True-Up Adjustment and the results of each such filing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;&nbsp;&nbsp;changes in the long-term or short-term credit ratings of the Servicer assigned by the Rating Agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii)&nbsp;&nbsp;&nbsp;&nbsp;material legislative or regulatory developments directly relevant to the Outstanding Storm Recovery Bonds (to be filed or furnished in a Form 8-K); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) any reports and other information that the Issuer is required to file with the SEC under the Exchange Act, including but not limited to periodic and current reports related to the Storm Recovery Bonds consistent with the disclosure and reporting regime established in Regulation AB.

Notwithstanding the foregoing, nothing herein shall preclude the Issuer from voluntarily suspending or terminating its filing obligations as Issuer with the SEC to the extent permitted by applicable law. Any such reports or information delivered to the Indenture Trustee for purposes of this <u>Section 3.07(g)</u> is for informational purposes only, and the Indenture Trustee's receipt of such reports or information shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to conclusively rely on an Officer's Certificate).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall direct the Indenture Trustee to post on the Indenture Trustee's website for investors (based solely on information set forth in the Semi-Annual Servicer's Certificate) with respect to the Outstanding Storm Recovery Bonds, to the extent such information is set forth in the Semi-Annual Servicer's Certificate, a statement showing the balance of Outstanding Storm Recovery Bonds that reflects the actual payments made on the Storm Recovery Bonds during the applicable period.

The address of the Indenture Trustee's website for investors is https://pivot.usbank.com. The Indenture Trustee shall promptly notify the Issuer, the Holders and the Rating Agencies of any change to the address of the website for investors.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall make all filings required under the Storm Recovery Law relating to the transfer of the ownership or security interest in the Storm Recovery Property other than those required to be made by the Seller or the Servicer pursuant to the Basic Documents.

SECTION 3.08.&nbsp;&nbsp;&nbsp;&nbsp; <u>Certain Negative Covenants</u>. So long as Storm Recovery Bonds are Outstanding, the Issuer shall not:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; except as expressly permitted by this Indenture and the other Basic Documents, sell, transfer, convey, exchange or otherwise dispose of any of the properties or assets of the Issuer, including those included in the Collateral, unless in accordance with <u>Article V</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; claim any credit on, or make any deduction from the principal or premium, if any, or interest payable in respect of, the Storm Recovery Bonds (other than amounts properly withheld from such payments under the Code, the Treasury regulations promulgated thereunder or other tax laws) or assert any claim against any present or former Holder by reason of the payment of the taxes levied or assessed upon any part of the Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; terminate its existence or dissolve or liquidate in whole or in part, except in a transaction permitted by <u>Section 3.10</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; (i) permit the validity or effectiveness of this Indenture or the other Basic Documents to be impaired, or permit the Lien of this Indenture to be amended, hypothecated, subordinated, terminated or discharged, or permit any Person to be released from any covenants or obligations with respect to the Storm Recovery Bonds under this Indenture except as may be expressly permitted hereby, (ii) permit any Lien (other than the Lien of this Indenture) to be created on or extend to or otherwise arise upon or burden the Collateral or any part thereof or any interest therein or the proceeds thereof (other than tax liens arising by operation of law with respect to amounts not yet due) or (iii) permit the Lien of the Indenture not to constitute a valid first priority perfected security interest in the related Storm Recovery Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; elect to be classified as an association taxable as a corporation for U.S. federal income tax, file any tax return or take any other action inconsistent with the treatment of the Issuer, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the sole owner of the Issuer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; change its name, identity or structure or the location of its chief executive office, unless at least ten Business Days prior to the effective date of any such change the Issuer delivers to the Indenture Trustee (with copies to the Rating Agencies) such documents, instruments or agreements, executed by the Issuer, as are necessary to reflect such change and to continue the perfection of the security interest of this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; take any action that is subject to a Rating Agency Condition without satisfying the Rating Agency Condition;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; except to the extent permitted by applicable law, voluntarily suspend or terminate its filing obligations with the SEC as described in <u>Section 3.07(g)</u>; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; issue any debt obligations other than storm recovery bonds permitted by this Indenture.

SECTION 3.09.&nbsp;&nbsp;&nbsp;&nbsp; <u>Annual Statement as to Compliance</u>. The Issuer will deliver to the Indenture Trustee, the Commission and the Rating Agencies not later than March 31 of each year (commencing with March 31, 2026), an Officer's Certificate stating, as to the Responsible Officer signing such Officer's Certificate, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; a review of the activities of the Issuer during the preceding 12 months ended December 31 (or, in the case of the first such Officer's Certificate, since the date hereof) and of performance under this Indenture has been made; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; to the best of such Responsible Officer's knowledge, based on such review, the Issuer has in all material respects complied with all conditions and covenants under this Indenture throughout such 12-month period (or such shorter period in the case of the first such Officer's Certificate), or, if there has been a default in the compliance of any such condition or covenant, specifying each such default known to such Responsible Officer and the nature and status thereof.

SECTION 3.10.&nbsp;&nbsp;&nbsp;&nbsp; <u>Issuer May Consolidate, etc., Only on Certain Terms</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall not consolidate or merge with or into any other Person, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the Person (if other than the Issuer) formed by or surviving such consolidation or merger shall (A) be a Person organized and existing under the laws of the United States of America or any State, (B) expressly assume, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture and the Series Supplement on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, and (C) assume all obligations and succeed to all rights of the Issuer under the Sale Agreement, Servicing Agreement and the other Basic Document to which the Issuer is a party;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;immediately after giving effect to such merger or consolidation, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Rating Agency Condition shall have been satisfied with respect to such merger or consolidation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Issuer shall have delivered to Duke Energy Carolinas, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Duke Energy Carolinas and the Indenture Trustee, and which may be based on a ruling from the Internal Revenue Service (unless the Internal Revenue Service has announced that it will not rule on the issues described in this paragraph)) to the effect that the consolidation or merger will not result in a material adverse U.S. federal or state income tax consequence to the Issuer, Duke Energy Carolinas, the Indenture Trustee or the then-existing Holders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such consolidation or merger and such supplemental indenture comply with this Indenture and the Series Supplement and that all conditions precedent herein provided for in this <u>Section 3.10(a)</u> with respect to such transaction have been complied with (including any filing required by the Exchange Act).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Except as specifically provided herein, the Issuer shall not sell, convey, exchange, transfer or otherwise dispose of any of its properties or assets included in the Collateral, to any Person, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the Person that acquires the properties and assets of the Issuer, the conveyance or transfer of which is hereby restricted, (A) shall be a United States citizen or a Person organized and existing under the laws of the United States of America or any State, (B) expressly assumes, by an indenture supplemental hereto, executed and delivered to the Indenture Trustee, in form and substance satisfactory to the Indenture Trustee, the performance or observance of every agreement and covenant of this Indenture on the part of the Issuer to be performed or observed, all as provided herein and in the Series Supplement, (C) expressly agrees by means of such supplemental indenture that all right, title and interest so sold, conveyed, exchanged, transferred or otherwise disposed of shall be subject and subordinate to the rights of Holders, (D) unless otherwise provided in the supplemental indenture referred to in <u>Section 3.10(b)(i)(B)</u>, expressly agrees to indemnify, defend and hold harmless the Issuer and the Indenture Trustee against and from any loss, liability or expense arising under or related to this Indenture, the Series Supplement and the Storm Recovery Bonds, (E) expressly agrees by means of such supplemental indenture that such Person (or if a group of Persons, then one specified Person) shall make all filings with the SEC (and any other appropriate Person) required by the Exchange Act in connection with the Collateral and the Storm Recovery Bonds and (F) if such sale, conveyance, exchange, transfer or disposal relates to the Issuer's rights and obligations under the Sale Agreement or the Servicing Agreement, assumes all obligations and succeeds to all rights of the Issuer under the Sale Agreement and the Servicing Agreement, as applicable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;immediately after giving effect to such transaction, no Default, Event of Default or Servicer Default shall have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Rating Agency Condition shall have been satisfied with respect to such transaction;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Issuer shall have delivered to Duke Energy Carolinas, the Indenture Trustee and the Rating Agencies an opinion or opinions of outside tax counsel (as selected by the Issuer, in form and substance reasonably satisfactory to Duke Energy Carolinas, and which may be based on a ruling from the Internal Revenue Service) to the effect that the disposition will not result in a material adverse U.S. federal or state income tax consequence to the Issuer, Duke Energy Carolinas, the Indenture Trustee or the then-existing Holders;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the Issuer shall have delivered to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel of external counsel of the Issuer each stating that such sale, conveyance, exchange, transfer or other disposition and such supplemental indenture comply with this Indenture and that all conditions precedent herein provided for in this <u>Section 3.10(b)</u> with respect to such transaction have been complied with (including any filing required by the Exchange Act).

SECTION 3.11.&nbsp;&nbsp;&nbsp;&nbsp; <u>Successor or Transferee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; Upon any consolidation or merger of the Issuer in accordance with <u>Section 3.10(a)</u>, the Person formed by or surviving such consolidation or merger (if other than the Issuer) shall succeed to, and be substituted for, and may exercise every right and power of, the Issuer under this Indenture with the same effect as if such Person had been named as the Issuer herein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Except as set forth in <u>Section 6.07</u>, upon a sale, conveyance, exchange, transfer or other disposition of all the assets and properties of the Issuer in accordance with <u>Section 3.10(b)</u>, the Issuer will be released from every covenant and agreement of this Indenture and the other Basic Documents to be observed or performed on the part of the Issuer with respect to the Storm Recovery Bonds and the Storm Recovery Property immediately following the consummation of such acquisition upon the delivery of written notice to the Indenture Trustee from the Person acquiring such assets and properties stating that the Issuer is to be so released.

SECTION 3.12.&nbsp;&nbsp;&nbsp;&nbsp; <u>No Other Business</u>. The Issuer shall not engage in any business other than financing, purchasing, owning, administering, managing and servicing the Storm Recovery Property and the other Collateral and the issuance of the Storm Recovery Bonds in the manner contemplated by the Financing Order and this Indenture and the other Basic Documents and activities incidental thereto.

SECTION 3.13.&nbsp;&nbsp;&nbsp;&nbsp; <u>No Borrowing</u>. The Issuer shall not issue, incur, assume, guarantee or otherwise become liable, directly or indirectly, for any indebtedness except for the Storm Recovery Bonds and any other indebtedness expressly permitted by or arising under the Basic Documents.

SECTION 3.14.&nbsp;&nbsp;&nbsp;&nbsp; <u>Servicer's Obligations</u>. The Issuer shall enforce the Servicer's compliance with and performance of all of the Servicer's material obligations under the Servicing Agreement.

SECTION 3.15.&nbsp;&nbsp;&nbsp;&nbsp; <u>Guarantees, Loans, Advances and Other Liabilities</u>. Except as otherwise contemplated by the Sale Agreement, the Servicing Agreement or this Indenture, the Issuer shall not make any loan or advance or credit to, or guarantee (directly or indirectly or by an instrument having the effect of assuring another's payment or performance on any obligation or capability of so doing or otherwise), endorse or otherwise become contingently liable, directly or indirectly, in connection with the obligations, stocks or dividends of, or own, purchase, repurchase or acquire (or agree contingently to do so) any stock, obligations, assets or securities of, or any other interest in, or make any capital contribution to, any other Person.

SECTION 3.16.&nbsp;&nbsp;&nbsp;&nbsp; <u>Capital Expenditures</u>. Other than the purchase of Storm Recovery Property from the Seller on a Closing Date, the Issuer shall not make any expenditure (by long-term or operating lease or otherwise) for capital assets (either realty or personalty).

SECTION 3.17.&nbsp;&nbsp;&nbsp;&nbsp; <u>Restricted Payments</u>. Except as provided in <u>Section 8.04(c)</u>, the Issuer shall not, directly or indirectly, (a) pay any dividend or make any distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer, (b) redeem, purchase, retire or otherwise acquire for value any such ownership or equity interest or similar security or (c) set aside or otherwise segregate any amounts for any such purpose; <u>provided</u>, <u>however</u>, that, if no Event of Default shall have occurred and be continuing or would be caused thereby, the Issuer may make, or cause to be made, any such distributions to any owner of an interest in the Issuer or otherwise with respect to any ownership or equity interest or similar security in or of the Issuer using funds distributed to the Issuer pursuant to <u>Section 8.02(e)(xi)</u> to the extent that such distributions would not cause the balance of the Capital Subaccount to decline below the Required Capital Level. The Issuer will not, directly or indirectly, make payments to or distributions from the Collection Account except in accordance with this Indenture and the other Basic Documents.

SECTION 3.18.&nbsp;&nbsp;&nbsp;&nbsp; <u>Notice of Events of Default</u>. The Issuer agrees to give the Indenture Trustee, the Commission and the Rating Agencies prompt written notice of each Default or Event of Default hereunder as provided in <u>Section 5.01</u>, and each default on the part of the Seller or the Servicer of its obligations under the Sale Agreement or the Servicing Agreement, respectively.

SECTION 3.19.&nbsp;&nbsp;&nbsp;&nbsp; <u>Further Instruments and Acts</u>. Upon request of the Indenture Trustee or as required by applicable law, the Issuer shall execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture and to maintain the first priority perfected security interest of the Indenture Trustee in the Collateral.

SECTION 3.20.&nbsp;&nbsp;&nbsp;&nbsp; <u>Inspection</u>. The Issuer agrees that, on reasonable prior notice, it will permit any representative of the Indenture Trustee and any representative of the Commission or Public Staff, during the Issuer's normal business hours, to examine all the books of account, records, reports and other papers of the Issuer, to make copies and extracts therefrom, to cause such books to be audited annually by Independent registered public accountants, and to discuss the Issuer's affairs, finances and accounts with the Issuer's officers, employees and Independent registered public accountants, all at such reasonable times and as often as may be reasonably requested. The Indenture Trustee, the Commission and Public Staff shall and shall cause its representatives to hold in confidence all such information except to the extent disclosure may be required by law (and all reasonable applications for confidential treatment are unavailing) and except to the extent that the Indenture Trustee may reasonably determine that such disclosure is consistent with its obligations hereunder. Notwithstanding anything herein to the contrary, the preceding sentence shall not be construed to prohibit (a) disclosure of any and all information that is or becomes publicly known, or information obtained by the Indenture Trustee from sources other than the Issuer, provided such parties are rightfully in possession of such information, (b) disclosure of any and all information (i) if required to do so by any applicable statute, law, rule or regulation, (ii) pursuant to any subpoena, civil investigative demand or similar demand or request of any court or regulatory authority exercising its proper jurisdiction, (iii) in any preliminary or final prospectus, registration statement or other document a copy of which has been filed with the SEC, (iv) to any affiliate, independent or internal auditor, agent, employee or attorney of the Indenture Trustee having a need to know the same, provided that such parties agree to be bound by the confidentiality provisions contained in this <u>Section 3.20</u>, or (v) to any Rating Agency or (c) any other disclosure authorized by the Issuer.

SECTION 3.21.&nbsp;&nbsp;&nbsp;&nbsp; <u>[Reserved].</u>

SECTION 3.22.&nbsp;&nbsp;&nbsp;&nbsp; <u>[Reserved]</u>.

SECTION 3.23.&nbsp;&nbsp;&nbsp;&nbsp; <u>Sale Agreement, Servicing Agreement, Intercreditor Agreements and Administration Agreement Covenants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer agrees to take all such lawful actions to enforce its rights under the Sale Agreement, the Servicing Agreement, the Intercreditor Agreements, the Administration Agreement and the other Basic Documents, and to compel or secure the performance and observance by the Seller, the Servicer, the Administrator and Duke Energy Carolinas of each of their respective obligations to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Intercreditor Agreements, the Administration Agreement and the other Basic Documents in accordance with the terms thereof. So long as no Event of Default occurs and is continuing, but subject to <u>Section 3.23(f)</u>, the Issuer may exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with the Sale Agreement, the Servicing Agreement, the Intercreditor Agreements and the Administration Agreement; <u>provided</u>, that such action shall not adversely affect the interests of the Holders in any material respect.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default occurs and is continuing, the Indenture Trustee may, and at the direction (which direction shall be in writing) of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds of all Tranches affected thereby or the Commission, shall, exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, Duke Energy Carolinas, the Administrator and the Servicer, as the case may be, under or in connection with the Sale Agreement, the Servicing Agreement, the Intercreditor Agreements and the Administration Agreement, including the right or power to take any action to compel or secure performance or observance by the Seller, Duke Energy Carolinas, the Administrator or the Servicer of each of their obligations to the Issuer thereunder and to give any consent, request, notice, direction, approval, extension or waiver under the Sale Agreement, the Servicing Agreement, the Intercreditor Agreements and the Administration Agreement, and any right of the Issuer to take such action shall be suspended.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; Except as set forth in <u>Section 3.23(d)</u>, the Administration Agreement, the Sale Agreement, the Servicing Agreement and the Intercreditor Agreements may be amended in accordance with the provisions thereof, so long as the Rating Agency Condition is satisfied in connection therewith, at any time and from time to time, without the consent of the Holders of the Storm Recovery Bonds, but with the acknowledgement of the Indenture Trustee; <u>provided</u>, that the Indenture Trustee shall provide such acknowledgment upon receipt of an Officer's Certificate of the Issuer evidencing satisfaction of such Rating Agency Condition, an Opinion of Counsel of external counsel of the Issuer evidencing that such amendment is in accordance with the provisions of such Basic Document and satisfaction of the Commission Condition (as described in <u>Section 9.03</u> hereof, or alternatively, if applicable, Section 13(b) of the Administration Agreement, Section 6.01(b) of the Sale Agreement or Section 8.01(c) of the Servicing Agreement).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Except as set forth in <u>Section 3.23(e)</u>, if the Issuer, the Seller, Duke Energy Carolinas, the Administrator, the Servicer or any other party to the respective agreement proposes to amend, modify, waive, supplement, terminate or surrender, or agree to any amendment, modification, waiver, supplement, termination or surrender of, the terms of the Sale Agreement, the Administration Agreement, the Servicing Agreement or the Intercreditor Agreements, or waive timely performance or observance by the Seller, Duke Energy Carolinas, the Administrator, the Servicer or any other party under the Sale Agreement, the Administration Agreement, the Servicing Agreement or the Intercreditor Agreements, in each case in such a way as would materially and adversely affect the interests of any Holder of Storm Recovery Bonds, the Issuer shall first notify the Rating Agencies of the proposed amendment, modification, waiver, supplement, termination or surrender and shall promptly notify the Indenture Trustee, the Commission and the Holders of the Storm Recovery Bonds in writing of the proposed amendment, modification, waiver, supplement, termination or surrender and whether the Rating Agency Condition has been satisfied with respect thereto (or, pursuant to an Issuer Request, the Indenture Trustee shall so notify the Holders of the Storm Recovery Bonds on the Issuer's behalf). The Indenture Trustee shall consent to such proposed amendment, modification, waiver, supplement, termination or surrender only if the Rating Agency Condition is satisfied and only with the (i) prior written consent of the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds (or, if less than all Tranches are affected, the affected Tranche) materially and adversely affected thereby and (ii) to the extent required by terms of the Sale Agreement, Administration Agreement, Servicing Agreement or the Intercreditor Agreements, satisfaction of the Commission Condition, (as described in <u>Section 9.03</u> hereof, or alternatively, if applicable, Section 13(b) of the Administration Agreement, Section 6.01(b) of the Sale Agreement or Section 8.01(c) of the Servicing Agreement). If any such amendment, modification, waiver, supplement, termination or surrender shall be so consented to by the Indenture Trustee or such Holders, the Issuer agrees to execute and deliver, in its own name and at its own expense, such agreements, instruments, consents and other documents as shall be necessary or appropriate in the circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; If the Issuer or the Servicer proposes to amend, modify, waive, supplement, terminate or surrender, or to agree to any amendment, modification, supplement, termination, waiver or surrender of, the process for True-Up Adjustments, the Issuer shall notify the Indenture Trustee and the Holders of the Storm Recovery Bonds and, when required, the Commission in writing of such proposal (or, pursuant to an Issuer Request, the Indenture Trustee shall so notify the Holders of the Storm Recovery Bonds on the Issuer's behalf), and the Indenture Trustee shall consent thereto with the prior written consent of the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds (or, if less than all Tranches are affected, the affected Tranche) affected thereby and only if the Rating Agency Condition, and to the extent required by the Servicing Agreement, Commission Condition, have been satisfied with respect thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; Promptly following a default by the Seller under the Sale Agreement, by the Administrator under the Administration Agreement or by any party under the Intercreditor Agreements, or the occurrence of a Servicer Default under the Servicing Agreement, and at the Issuer's expense, the Issuer agrees to take all such lawful actions as the Indenture Trustee may request to compel or secure the performance and observance by each of the Seller, the Administrator or the Servicer, and by such party to the Intercreditor Agreements, of their obligations under and in accordance with the Sale Agreement, the Servicing Agreement, the Administration Agreement and the Intercreditor Agreements, as the case may be, in accordance with the terms thereof, and to exercise any and all rights, remedies, powers and privileges lawfully available to the Issuer under or in connection with such agreements to the extent and in the manner directed by the Indenture Trustee, including the transmission of notices of any default by the Seller, the Administrator or the Servicer, respectively, thereunder and the institution of legal or administrative actions or Proceedings to compel or secure performance of their obligations under the Sale Agreement, the Servicing Agreement, the Administration Agreement or the Intercreditor Agreements.

SECTION 3.24.&nbsp;&nbsp;&nbsp;&nbsp; <u>Taxes</u>. So long as any of the Storm Recovery Bonds are Outstanding, the Issuer shall pay all taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Collateral; <u>provided</u>, that no such tax need be paid if the Issuer is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Issuer has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

SECTION 3.25.&nbsp;&nbsp;&nbsp;&nbsp; <u>Notices from Holders</u>. The Issuer shall promptly transmit any notice received by it from the Holders to the Indenture Trustee.

SECTION 3.26.&nbsp;&nbsp;&nbsp;&nbsp; <u>Volcker Rule</u>. The Issuer is structured so as not to be a "covered fund" under the regulations adopted to implement Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the "Volcker Rule."

ARTICLE IV

Satisfaction and Discharge; Defeasance

SECTION 4.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Satisfaction and Discharge of Indenture; Defeasance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; This Indenture shall cease to be of further effect with respect to the Storm Recovery Bonds, and the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture with respect to the Storm Recovery Bonds, when:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; Either:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A)&nbsp;&nbsp;&nbsp;&nbsp; all Storm Recovery Bonds theretofore authenticated and delivered (other than (1) Storm Recovery Bonds that have been destroyed, lost or stolen and that have been replaced or paid as provided in <u>Section 2.06</u> and (2) Storm Recovery Bonds for whose payment money has theretofore been deposited in trust or segregated and held in trust by the Issuer and thereafter repaid to the Issuer or discharged from such trust, as provided in the last paragraph of <u>Section 3.03</u>) have been delivered to the Indenture Trustee for cancellation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B)&nbsp;&nbsp;&nbsp;&nbsp; either (1) the Scheduled Final Payment Date has occurred with respect to all Storm Recovery Bonds not theretofore delivered to the Indenture Trustee for cancellation or (2) the Storm Recovery Bonds will be due and payable on their respective Scheduled Final Payment Dates within one year, and, in any such case, the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations that through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Storm Recovery Bonds not theretofore delivered to the Indenture Trustee for cancellation, On-going Financing Costs and all other sums payable hereunder by the Issuer with respect to the Storm Recovery Bonds when scheduled to be paid and to discharge the entire indebtedness on the Storm Recovery Bonds when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;the Issuer has paid or caused to be paid all other sums payable hereunder by the Issuer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) pursuant to <u>Section 10.04</u>, the Issuer has delivered to the Indenture Trustee an Officer's Certificate, an Opinion of Counsel of external counsel of the Issuer and (if required by the Trust Indenture Act or the Indenture Trustee) an Independent Certificate from a firm of registered public accountants, each meeting the applicable requirements of <u>Section 10.01(a)</u> and each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture with respect to the Storm Recovery Bonds have been complied with.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Subject to <u>Section 4.01(c)</u> and <u>Section 4.02</u>, the Issuer at any time may terminate (i) all its obligations under this Indenture with respect to the Storm Recovery Bonds ("<u>Legal Defeasance Option</u>") or (ii) its obligations under <u>Section 3.04</u>, <u>Section 3.05</u>, <u>Section 3.06</u>, <u>Section 3.07</u>, <u>Section 3.08</u>, <u>Section 3.09</u>, <u>Section 3.10</u>, <u>Section 3.12</u>, <u>Section 3.13</u>, <u>Section 3.14</u>, <u>Section 3.15</u>, <u>Section 3.16</u>, <u>Section 3.17</u>, <u>Section 3.18</u> and <u>Section 3.19</u> and the operation of <u>Section 5.01(c)</u> with respect to the Storm Recovery Bonds ("<u>Covenant Defeasance Option</u>"). The Issuer may exercise the Legal Defeasance Option with respect to the Storm Recovery Bonds notwithstanding its prior exercise of the Covenant Defeasance Option.

If the Issuer exercises the Legal Defeasance Option, the maturity of the Storm Recovery Bonds may not be accelerated because of an Event of Default. If the Issuer exercises the Covenant Defeasance Option, the maturity of the Storm Recovery Bonds may not be accelerated because of an Event of Default specified in <u>Section 5.01(c)</u>.

Upon satisfaction of the conditions set forth herein to the exercise of the Legal Defeasance Option or the Covenant Defeasance Option of the Storm Recovery Bonds, the Indenture Trustee, on reasonable written demand of and at the expense of the Issuer, shall execute proper instruments acknowledging satisfaction and discharge of the obligations that are terminated pursuant to such exercise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding <u>Section 4.01(a)</u> and <u>Section 4.01(b)</u>, (i) rights of registration of transfer and exchange, (ii) substitution of mutilated, destroyed, lost or stolen Storm Recovery Bonds, (iii) rights of Holders to receive payments of principal, premium, if any, and interest, (iv) <u>Section 4.03</u> and <u>Section 4.04</u>, (v) the rights, obligations and immunities of the Indenture Trustee hereunder (including the rights of the Indenture Trustee under <u>Section 6.07</u> and the obligations of the Indenture Trustee under <u>Section 4.03</u>) and (vi) the rights of Holders as beneficiaries hereof with respect to the property deposited with the Indenture Trustee payable to all or any of them, each shall survive until the Storm Recovery Bonds as to which this Indenture or certain obligations hereunder have been satisfied and discharged pursuant to <u>Section 4.01(a)</u> or <u>Section 4.01(b)</u>. Thereafter the obligations in <u>Section 6.07</u> and <u>Section 4.04</u> shall survive.

SECTION 4.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Conditions to Defeasance</u>. The Issuer may exercise the Legal Defeasance Option or the Covenant Defeasance Option with respect to the Storm Recovery Bonds only if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; the Issuer has irrevocably deposited or caused to be irrevocably deposited in trust with the Indenture Trustee (i) cash and/or (ii) U.S. Government Obligations that through the scheduled payments of principal and interest in respect thereof in accordance with their terms are in an amount sufficient to pay principal, interest and premium, if any, on the Storm Recovery Bonds not therefore delivered to the Indenture Trustee for cancellation and On-going Financing Costs and all other sums payable hereunder by the Issuer with respect to the Storm Recovery Bonds when scheduled to be paid and to discharge the entire indebtedness on the Storm Recovery Bonds when due;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; the Issuer delivers to the Indenture Trustee a certificate from a nationally recognized firm of Independent registered public accountants expressing its opinion that the payments of principal of and interest on the deposited U.S. Government Obligations when due and without reinvestment plus any deposited cash will provide cash at such times and in such amounts (but, in the case of the Legal Defeasance Option only, not more than such amounts) as will be sufficient to pay in respect of the Storm Recovery Bonds (i) principal in accordance with the Expected Sinking Fund Schedule therefor, (ii) interest when due and (iii) On-going Financing Costs and all other sums payable hereunder by the Issuer with respect to the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; in the case of the Legal Defeasance Option, 95 days after the deposit is made and during the 95-day period no Default specified in <u>Section 5.01(e)</u> or <u>Section 5.01(f)</u> occurs that is continuing at the end of the period;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; no Default has occurred and is continuing on the day of such deposit and after giving effect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; in the case of an exercise of the Legal Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer stating that (i) the Issuer has received from, or there has been published by, the Internal Revenue Service a ruling or (ii) since the date of execution of this Indenture, there has been a change in the applicable U.S. federal income tax law, in either case to the effect that, and based thereon such opinion shall confirm that, the Holders of the Storm Recovery Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such legal defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such legal defeasance had not occurred;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; in the case of an exercise of the Covenant Defeasance Option, the Issuer shall have delivered to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that the Holders of the Storm Recovery Bonds will not recognize income, gain or loss for U.S. federal income tax purposes as a result of such covenant defeasance and will be subject to U.S. federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; the Issuer delivers to the Indenture Trustee an Officer's Certificate and an Opinion of Counsel, each stating that all conditions precedent to the Legal Defeasance Option or the Covenant Defeasance Option, as applicable, have been complied with as required by this <u>Article IV</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; the Issuer delivers to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer to the effect that: (i) in a case under the Bankruptcy Code in which Duke Energy Carolinas (or any of its Affiliates, other than the Issuer) is the debtor, the court would hold that the deposited moneys or U.S. Government Obligations would not be in the bankruptcy estate of Duke Energy Carolinas (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations); and (ii) in the event Duke Energy Carolinas (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) were to be a debtor in a case under the Bankruptcy Code, the court would not disregard the separate legal existence of Duke Energy Carolinas (or any of its Affiliates, other than the Issuer, that deposited the moneys or U.S. Government Obligations) and the Issuer so as to order substantive consolidation under the Bankruptcy Code of the Issuer's assets and liabilities with the assets and liabilities of Duke Energy Carolinas or such other Affiliate; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the Rating Agency Condition shall have been satisfied with respect to the exercise of any Legal Defeasance Option or Covenant Defeasance Option.

Notwithstanding any other provision of this <u>Section 4.02</u>, no delivery of moneys or U.S. Government Obligations to the Indenture Trustee shall terminate any obligation of the Issuer to the Indenture Trustee under this Indenture or the Series Supplement or any obligation of the Issuer to apply such moneys or U.S. Government Obligations under <u>Section 4.03</u> until principal of and premium, if any, and interest on the Storm Recovery Bonds shall have been paid in accordance with the provisions of this Indenture and the Series Supplement.

SECTION 4.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Application of Trust Money</u>. All moneys or U.S. Government Obligations deposited with the Indenture Trustee pursuant to <u>Section 4.01</u> or <u>Section 4.02</u> shall be held in trust and applied by it, in accordance with the provisions of the Storm Recovery Bonds and this Indenture, to the payment, either directly or through any Paying Agent, as the Indenture Trustee may determine, to the Holders of the particular Storm Recovery Bonds for the payment of which such moneys have been deposited with the Indenture Trustee, of all sums due and to become due thereon for principal, premium, if any, and interest; but such moneys need not be segregated from other funds except to the extent required herein or in the Servicing Agreement or required by law. Notwithstanding anything to the contrary in this <u>Article IV</u>, the Indenture Trustee shall deliver or pay to the Issuer from time to time upon Issuer Request any moneys or U.S. Government Obligations held by it pursuant to <u>Section 4.02</u> that, in the opinion of a nationally recognized firm of Independent registered public accountants expressed in a written certification thereof delivered to the Indenture Trustee (and not at the cost or expense of the Indenture Trustee), are in excess of the amount thereof that would be required to be deposited for the purpose for which such moneys or U.S. Government Obligations were deposited; <u>provided</u>, that any such payment shall be subject to the satisfaction of the Rating Agency Condition.

SECTION 4.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Repayment of Moneys Held by Paying Agent</u>. In connection with the satisfaction and discharge of this Indenture or the Covenant Defeasance Option or Legal Defeasance Option with respect to Storm Recovery Bonds, all moneys then held by any Paying Agent other than the Indenture Trustee under the provisions of this Indenture shall, upon demand of the Issuer, be paid to the Indenture Trustee to be held and applied according to <u>Section 3.03</u> and thereupon such Paying Agent shall be released from all further liability with respect to such moneys.

ARTICLE V

Remedies

SECTION 5.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Events of Default</u>. "<u>Event of Default</u>" means any one or more of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; default in the payment of any interest on any Storm Recovery Bond when the same becomes due and payable (whether such failure to pay interest is caused by a shortfall in Storm Recovery Charges received or otherwise), and such default shall continue for a period of five Business Days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; default in the payment of the then unpaid principal of any Storm Recovery Bond on the Final Maturity Date, or, if applicable, any Tranche on the Final Maturity Date for such Tranche;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; default in the observance or performance of any covenant or agreement of the Issuer made in this Indenture (other than defaults specified in <u>Section 5.01(a)</u> or <u>Section 5.01(b)</u>), and such default shall continue or not be cured, for a period of 30 days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least 25 percent of the Outstanding Amount of the Storm Recovery Bonds, a written notice specifying such default and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder or (ii) the date that the Issuer has actual knowledge of the default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; any representation or warranty of the Issuer made in this Indenture, the Series Supplement or in any certificate or other writing delivered pursuant hereto or the Series Supplement or in connection herewith proving to have been incorrect in any material respect as of the time when the same shall have been made, and the circumstance or condition in respect of which such representation or warranty was incorrect shall not have been eliminated or otherwise cured, within 30 days after the earlier of (i) the date that there shall have been given, by registered or certified mail, to the Issuer by the Indenture Trustee or to the Issuer and the Indenture Trustee by the Holders of at least twenty-five (25) percent of the Outstanding Amount of the Storm Recovery Bonds, a written notice specifying such incorrect representation or warranty and requiring it to be remedied and stating that such notice is a "Notice of Default" hereunder or (ii) the date the Issuer has actual knowledge of the default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of the Issuer or any substantial part of the Collateral in an involuntary case or proceeding under any applicable U.S. federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or ordering the winding-up or liquidation of the Issuer's affairs, and such decree or order shall remain unstayed and in effect for a period of 90 consecutive days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; the commencement by the Issuer of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law now or hereafter in effect, or the consent by the Issuer to the entry of an order for relief in an involuntary case or proceeding under any such law, or the consent by the Issuer to the appointment or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official of the Issuer or for any substantial part of the Collateral, or the making by the Issuer of any general assignment for the benefit of creditors, or the failure by the Issuer generally to pay its debts as such debts become due, or the taking of action by the Issuer in furtherance of any of the foregoing; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; any act or failure to act by the State of North Carolina or any of its agencies (including the Commission), officers or employees that violates the State Pledge or is not in accordance with the State Pledge.

The Issuer shall deliver to a Responsible Officer of the Indenture Trustee and to the Rating Agencies, within five days after a Responsible Officer of the Issuer has knowledge of the occurrence thereof, written notice in the form of an Officer's Certificate of any event (i) that is an Event of Default under <u>Section 5.01(a)</u>, <u>Section 5.01(b)</u>, <u>Section 5.01(f)</u>, or <u>Section 5.01(g)</u>or (ii) that with the giving of notice, the lapse of time, or both, would become an Event of Default under <u>Section 5.01(c)</u>, <u>Section 5.01(d)</u> or <u>Section 5.01(e)</u>, including, in each case, the status of such Default or Event of Default and what action the Issuer is taking or proposes to take with respect thereto.

SECTION 5.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Acceleration of Maturity; Rescission and Annulment</u>. If an Event of Default (other than an Event of Default under <u>Section 5.01(g)</u>) should occur and be continuing, then and in every such case the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Storm Recovery Bonds may declare the Storm Recovery Bonds to be immediately due and payable, by a notice in writing to the Issuer (and to the Indenture Trustee and the Commission if given by Holders), and upon any such declaration the unpaid principal amount of the Storm Recovery Bonds, together with accrued and unpaid interest thereon through the date of acceleration, shall become immediately due and payable.

At any time after such declaration of acceleration of maturity has been made and before a judgment or decree for payment of the money due has been obtained by the Indenture Trustee as hereinafter in this <u>Article V</u> provided, the Holders representing a majority of the Outstanding Amount of the Storm Recovery Bonds, by written notice to the Issuer, the Commission and the Indenture Trustee, may rescind and annul such declaration and its consequences if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; the Issuer has paid or deposited with the Indenture Trustee a sum sufficient to pay:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; all payments of principal of and premium, if any, and interest on all Storm Recovery Bonds due and owing at such time as if such Event of Default had not occurred and was not continuing and all other amounts that would then be due hereunder or upon the Storm Recovery Bonds if the Event of Default giving rise to such acceleration had not occurred; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp; all sums paid or advanced by the Indenture Trustee hereunder and the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; all Events of Default, other than the nonpayment of the principal of the Storm Recovery Bonds that has become due solely by such acceleration, have been cured or waived as provided in <u>Section 5.12</u>.

No such rescission shall affect any subsequent default or impair any right consequent thereto.

SECTION 5.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Collection of Indebtedness and Suits for Enforcement by Indenture Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default under <u>Section 5.01(a)</u> or <u>Section 5.01(b)</u> has occurred and is continuing, subject to <u>Section 10.16</u>, the Indenture Trustee, in its own name and as trustee of an express trust, may institute a Proceeding for the collection of the sums so due and unpaid, and may prosecute such Proceeding to judgment or final decree, and, subject to the limitations on recourse set forth herein, may enforce the same against the Issuer or other obligor upon the Storm Recovery Bonds and collect in the manner provided by law out of the property of the Issuer or other obligor upon the Storm Recovery Bonds wherever situated the moneys payable, or the Storm Recovery Collateral and the proceeds thereof, the whole amount then due and payable on the Storm Recovery Bonds for principal, premium, if any, and interest, with interest upon the overdue principal and premium, if any, and, to the extent payment at such rate of interest shall be legally enforceable, upon overdue installments of interest, at the respective rate borne by the Storm Recovery Bonds or the applicable Tranche and in addition thereto such further amount as shall be sufficient to cover the costs and expenses of collection, including the reasonable compensation, expenses, disbursements and advances of the Indenture Trustee and its agents and counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default (other than Event of Default under <u>Section 5.01(g)</u>) occurs and is continuing, the Indenture Trustee shall, as more particularly provided in <u>Section 5.04</u>, proceed to protect and enforce its rights and the rights of the Holders, by such appropriate Proceedings as the Indenture Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein, or to enforce any other proper remedy or legal or equitable right vested in the Indenture Trustee by this Indenture and the Series Supplement or by law, including foreclosing or otherwise enforcing the Lien of the Collateral securing the Storm Recovery Bonds or applying to the Commission or a court of competent jurisdiction for sequestration of revenues arising with respect to the Storm Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default under <u>Section 5.01(e)</u> or <u>Section 5.01(f)</u> has occurred and is continuing, the Indenture Trustee, irrespective of whether the principal of any Storm Recovery Bonds shall then be due and payable as therein expressed or by declaration or otherwise and irrespective of whether the Indenture Trustee shall have made any demand pursuant to the provisions of this <u>Section 5.03</u>, shall be entitled and empowered, by intervention in any Proceedings related to such Event of Default or otherwise:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; to file and prove a claim or claims for the whole amount of principal, premium, if any, and interest owing and unpaid in respect of the Storm Recovery Bonds and to file such other papers or documents as may be necessary or advisable in order to have the claims of the Indenture Trustee (including any claim for reasonable compensation to the Indenture Trustee and each predecessor Indenture Trustee, and their respective agents, attorneys and counsel, and for reimbursement of all expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee, except as a result of negligence or bad faith) and of the Holders allowed in such Proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;unless prohibited by applicable law and regulations, to vote on behalf of the Holders in any election of a trustee in bankruptcy, a standby trustee or Person performing similar functions in any such Proceedings;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) to collect and receive any moneys or other property payable or deliverable on any such claims and to distribute all amounts received with respect to the claims of the Holders and of the Indenture Trustee on their behalf; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) to file such proofs of claim and other papers and documents as may be necessary or advisable in order to have the claims of the Indenture Trustee or the Holders allowed in any judicial proceeding relative to the Issuer, its creditors and its property;

and any trustee, receiver, liquidator, custodian or other similar official in any such Proceeding is hereby authorized by each of such Holders to make payments to the Indenture Trustee, and, in the event that the Indenture Trustee shall consent to the making of payments directly to such Holders, to pay to the Indenture Trustee such amounts as shall be sufficient to cover reasonable compensation to the Indenture Trustee, each predecessor Indenture Trustee and their respective agents, attorneys and counsel, and all other expenses and liabilities incurred, and all advances made, by the Indenture Trustee and each predecessor Indenture Trustee except as a result of negligence or bad faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Nothing herein contained shall be deemed to authorize the Indenture Trustee to authorize or consent to or vote for or accept or adopt on behalf of any Holder any plan of reorganization, arrangement, adjustment or composition affecting the Storm Recovery Bonds or the rights of any Holder thereof or to authorize the Indenture Trustee to vote in respect of the claim of any Holder in any such proceeding except, as aforesaid, to vote for the election of a trustee in bankruptcy or similar Person.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; All rights of action and of asserting claims under this Indenture, or under any of the Storm Recovery Bonds, may be enforced by the Indenture Trustee without the possession of any of the Storm Recovery Bonds or the production thereof in any trial or other Proceedings relative thereto, and any such action or proceedings instituted by the Indenture Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment, subject to the payment of the expenses, disbursements and compensation of the Indenture Trustee, each predecessor Indenture Trustee and their respective agents and attorneys, shall be for the ratable benefit of the Holders of the Storm Recovery Bonds.

SECTION 5.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Remedies; Priorities</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default (other than an Event of Default under <u>Section 5.01(g)</u>) shall have occurred and be continuing, the Indenture Trustee may do one or more of the following (subject to <u>Section 5.05</u>):

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; institute Proceedings in its own name and as trustee of an express trust for the collection of all amounts then payable on the Storm Recovery Bonds or under this Indenture with respect thereto, whether by declaration of acceleration or otherwise, and, subject to the limitations on recovery set forth herein, enforce any judgment obtained, and collect from the Issuer or any other obligor moneys adjudged due, upon the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;institute Proceedings from time to time for the complete or partial foreclosure of this Indenture with respect to the Storm Recovery Collateral;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) exercise any remedies of a secured party under the UCC, the Storm Recovery Law or any other applicable law and take any other appropriate action to protect and enforce the rights and remedies of the Indenture Trustee and the Holders of the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) at the written direction of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds, either sell the Storm Recovery Collateral or any portion thereof or rights or interest therein, at one or more public or private sales called and conducted in any manner permitted by law, or elect that the Issuer maintain possession of all or a portion of the Storm Recovery Collateral pursuant to <u>Section 5.05</u> and continue to apply the Storm Recovery Charge Collection as if there had been no declaration of acceleration; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) exercise all rights, remedies, powers, privileges and claims of the Issuer against the Seller, the Administrator or the Servicer under or in connection with, and pursuant to the terms of, the Sale Agreement, the Administration Agreement or the Servicing Agreement;

<u>provided</u>, <u>however</u>, that the Indenture Trustee may not sell or otherwise liquidate any portion of the Storm Recovery Collateral following such an Event of Default, other than an Event of Default described in <u>Section 5.01(a)</u> or <u>Section 5.01(b)</u>, unless (A) the Holders of 100 percent of the Outstanding Amount of the Storm Recovery Bonds consent thereto, (B) the proceeds of such sale or liquidation distributable to the Holders are sufficient to discharge in full all amounts then due and unpaid upon the Storm Recovery Bonds for principal, premium, if any, and interest after taking into account payment of all amounts due prior thereto pursuant to the priorities set forth in <u>Section 8.02(e)</u> or (C) the Indenture Trustee determines that the Storm Recovery Collateral will not continue to provide sufficient funds for all payments on the Storm Recovery Bonds as they would have become due if the Storm Recovery Bonds had not been declared due and payable, and the Indenture Trustee obtains the written consent of Holders of at least two-thirds of the Outstanding Amount of the Storm Recovery Bonds. In determining such sufficiency or insufficiency with respect to clause (B) above and clause (C) above, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Storm Recovery Collateral for such purpose, at Issuer's expense.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default under <u>Section 5.01(g)</u> shall have occurred and be continuing, the Indenture Trustee, for the benefit of the Secured Parties, shall be entitled and empowered, to the extent permitted by applicable law, to institute or participate in Proceedings necessary to compel performance of or to enforce the State Pledge and to collect any monetary damages incurred by the Holders or the Indenture Trustee as a result of any such Event of Default, and may prosecute any such Proceeding to final judgment or decree. Such remedy shall be the only remedy that the Indenture Trustee may exercise if the only Event of Default that has occurred and is continuing is an Event of Default under <u>Section 5.01(g)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; If the Indenture Trustee collects any money pursuant to this <u>Article V</u>, it shall pay out such money in accordance with the priorities set forth in <u>Section 8.02(e)</u>.

SECTION 5.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Optional Preservation of the Collateral</u>. If the Storm Recovery Bonds have been declared to be due and payable under <u>Section 5.02</u> following an Event of Default and such declaration and its consequences have not been rescinded and annulled, the Indenture Trustee may, but need not, elect to maintain possession of all or a portion of the related Storm Recovery Collateral. It is the desire of the parties hereto and the Holders that there be at all times sufficient funds for the payment of principal of and premium, if any, and interest on the Storm Recovery Bonds, and the Indenture Trustee shall take such desire into account when determining whether or not to maintain possession of the Storm Recovery Collateral. In determining whether to maintain possession of the Storm Recovery Collateral or sell or liquidate the same, the Indenture Trustee may, but need not, obtain and conclusively rely upon an opinion of an Independent investment banking or accounting firm of national reputation as to the feasibility of such proposed action and as to the sufficiency of the Storm Recovery Collateral for such purpose.

SECTION 5.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Limitation of Suits</u>. No Holder of any Storm Recovery Bond shall have any right to institute any Proceeding, judicial or otherwise, to avail itself of any remedies provided in the Storm Recovery Law or to avail itself of the right to foreclose on the Storm Recovery Collateral or otherwise enforce the Lien and the security interest on the Storm Recovery Collateral with respect to this Indenture and the Series Supplement, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; such Holder previously has given written notice to the Indenture Trustee of a continuing Event of Default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds have made written request to the Indenture Trustee to institute such Proceeding in respect of such Event of Default in its own name as Indenture Trustee hereunder;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; such Holder or Holders have offered to the Indenture Trustee indemnity satisfactory to it against the costs, expenses and liabilities to be incurred in complying with such request;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; the Indenture Trustee for 60 days after its receipt of such notice, request and offer of indemnity has failed to institute such Proceedings; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; no direction inconsistent with such written request has been given to the Indenture Trustee during such 60-day period by the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds;

it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture to affect, disturb or prejudice the rights of any other Holders or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, except in the manner herein provided.

In the event the Indenture Trustee shall receive conflicting or inconsistent requests and indemnity from two or more groups of Holders, each representing less than a majority of the Outstanding Amount of the Storm Recovery Bonds, the Indenture Trustee in its sole discretion may file a petition with a court of competent jurisdiction to resolve such conflict or determine what action, if any, shall be taken, notwithstanding any other provisions of this Indenture.

SECTION 5.07.&nbsp;&nbsp;&nbsp;&nbsp; <u>Unconditional Rights of Holders To Receive Principal, Premium, if any, and Interest</u>. Notwithstanding any other provisions in this Indenture, the Holder of any Storm Recovery Bond shall have the right, which is absolute and unconditional, (a) to receive payment of (i) the interest, if any, on such Storm Recovery Bond on the due dates thereof expressed in such Storm Recovery Bond or in this Indenture or (ii) the unpaid principal, if any, of the Storm Recovery Bonds on the Final Maturity Date or Final Maturity Date for such Tranche therefor and (b) to institute suit for the enforcement of any such payment, and such right shall not be impaired without the consent of such Holder.

SECTION 5.08.&nbsp;&nbsp;&nbsp;&nbsp; <u>Restoration of Rights and Remedies</u>. If the Indenture Trustee or any Holder has instituted any Proceeding to enforce any right or remedy under this Indenture and such Proceeding has been discontinued or abandoned for any reason or has been determined adversely to the Indenture Trustee or to such Holder, then and in every such case the Issuer, the Indenture Trustee and the Holders shall, subject to any determination in such Proceeding, be restored severally and respectively to their former positions hereunder, and thereafter all rights and remedies of the Indenture Trustee and the Holders shall continue as though no such Proceeding had been instituted.

SECTION 5.09.&nbsp;&nbsp;&nbsp;&nbsp; <u>Rights and Remedies Cumulative</u>. No right or remedy herein conferred upon or reserved to the Indenture Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 5.10.&nbsp;&nbsp;&nbsp;&nbsp; <u>Delay or Omission Not a Waiver</u>. No delay or omission of the Indenture Trustee or any Holder to exercise any right or remedy accruing upon any Default or Event of Default shall impair any such right or remedy or constitute a waiver of any such Default or Event of Default or an acquiescence therein. Every right and remedy given by this <u>Article V</u> or by law to the Indenture Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Indenture Trustee or by the Holders, as the case may be.

SECTION 5.11.&nbsp;&nbsp;&nbsp;&nbsp; <u>Control by Holders</u>. The Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds (or, if less than all Tranches are affected, the affected Tranche) shall have the right to direct the time, method and place of conducting any Proceeding for any remedy available to the Indenture Trustee with respect to the Storm Recovery Bonds of such Tranche or Tranches or exercising any trust or power conferred on the Indenture Trustee with respect to such Tranche or Tranches; <u>provided</u>, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; such direction shall not be in conflict with any rule of law or with this Indenture or the Series Supplement and shall not involve the Indenture Trustee in any personal liability or expense;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; subject to other conditions specified in <u>Section 5.04</u>, any direction to the Indenture Trustee to sell or liquidate any Storm Recovery Collateral shall be by the Holders representing 100 percent of the Outstanding Amount of the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; if the conditions set forth in <u>Section 5.05</u> have been satisfied and the Indenture Trustee elects to retain the Storm Recovery Collateral pursuant to <u>Section 5.05</u>, then any direction to the Indenture Trustee by Holders representing less than 100 percent of the Outstanding Amount of the Storm Recovery Bonds to sell or liquidate the Storm Recovery Collateral shall be of no force and effect; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; the Indenture Trustee may take any other action deemed proper by the Indenture Trustee that is not inconsistent with such direction;

<u>provided</u>, <u>however</u>, that the Indenture Trustee's duties shall be subject to <u>Section 6.01</u>, and the Indenture Trustee need not take any action that it determines might involve it in liability or might materially adversely affect the rights of any Holders not consenting to such action. Furthermore and without limiting the foregoing, the Indenture Trustee shall not be required to take any action for which it reasonably believes that it will not be indemnified to its satisfaction against any cost, expense or liabilities.

SECTION 5.12.&nbsp;&nbsp;&nbsp;&nbsp; <u>Waiver of Past Defaults</u>. Prior to the declaration of the acceleration of the maturity of the Storm Recovery Bonds as provided in <u>Section 5.02</u>, the Holders representing a majority of the Outstanding Amount of the Storm Recovery Bonds may waive any past Default or Event of Default and its consequences except a Default (a) in payment of principal of or premium, if any, or interest on any of the Storm Recovery Bonds or (b) in respect of a covenant or provision hereof that cannot be modified or amended without the consent of the Holder of each Storm Recovery Bond of all Tranches affected. In the case of any such waiver, the Issuer, the Indenture Trustee and the Holders shall be restored to their former positions and rights hereunder, respectively, but no such waiver shall extend to any subsequent or other Default or impair any right consequent thereto.

Upon any such waiver, such Default shall cease to exist and be deemed to have been cured and not to have occurred, and any Event of Default arising therefrom shall be deemed to have been cured and not to have occurred, for every purpose of this Indenture, but no such waiver shall extend to any subsequent or other Default or Event of Default or impair any right consequent thereto.

SECTION 5.13.&nbsp;&nbsp;&nbsp;&nbsp; <u>Undertaking for Costs</u>. All parties to this Indenture agree, and each Holder of any Storm Recovery Bond by such Holder's acceptance thereof shall be deemed to have agreed, that any court may in its discretion require, in any suit for the enforcement of any right or remedy under this Indenture, or in any suit against the Indenture Trustee for any action taken, suffered or omitted by it as Indenture Trustee, the filing by any party litigant in such suit of an undertaking to pay the costs of such suit, and that such court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party litigant in such suit, having due regard to the merits and good faith of the claims or defenses made by such party litigant; but the provisions of this <u>Section 5.13</u> shall not apply to (a) any suit instituted by the Indenture Trustee, (b) any suit instituted by any Holder, or group of Holders, in each case holding in the aggregate more than ten percent of the Outstanding Amount of the Storm Recovery Bonds or (c) any suit instituted by any Holder for the enforcement of the payment of (i) interest on any Storm Recovery Bond on or after the due dates expressed in such Storm Recovery Bond and in this Indenture or (ii) the unpaid principal, if any, of any Storm Recovery Bond on or after the Final Maturity Date or Final Maturity Date for such Tranche therefor.

SECTION 5.14.&nbsp;&nbsp;&nbsp;&nbsp; <u>Waiver of Stay or Extension Laws</u>. The Issuer covenants (to the extent that it may lawfully do so) that it will not at any time insist upon or plead or, in any manner whatsoever, claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, that may affect the covenants or the performance of this Indenture; and the Issuer (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and covenants that it will not hinder, delay or impede the execution of any power herein granted to the Indenture Trustee, but will suffer and permit the execution of every such power as though no such law had been enacted.

SECTION 5.15.&nbsp;&nbsp;&nbsp;&nbsp; <u>Action on Storm Recovery Bonds</u>. The Indenture Trustee's right to seek and recover judgment on the Storm Recovery Bonds or under this Indenture shall not be affected by the seeking, obtaining or application of any other relief under or with respect to this Indenture. Neither the Lien of this Indenture nor any rights or remedies of the Indenture Trustee or the Holders shall be impaired by the recovery of any judgment by the Indenture Trustee against the Issuer or by the levy of any execution under such judgment upon any portion of the Collateral or any other assets of the Issuer.

ARTICLE VI

The Indenture Trustee

SECTION 6.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Duties of Indenture Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; If an Event of Default has occurred and is continuing, the Indenture Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent person would exercise or use under the circumstances in the conduct of such person's own affairs.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Except during the continuance of an Event of Default:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the Indenture Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Indenture Trustee; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp; in the absence of bad faith on its part, the Indenture Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Indenture Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Indenture Trustee, the Indenture Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may not be relieved from liability for its own negligent action, its own bad faith, its own negligent failure to act or its own willful misconduct, except that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; this <u>Section 6.01(c)</u> does not limit the effect of <u>Section 6.01(b)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;the Indenture Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer unless it is proved that the Indenture Trustee was negligent in ascertaining the pertinent facts; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Indenture Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Every provision of this Indenture that in any way relates to the Indenture Trustee is subject to <u>Section 6.01(a)</u>, <u>Section 6.01(b)</u> and <u>Section 6.01(c)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be liable for interest on any money received by it except as the Indenture Trustee may agree in writing with the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; Money held in trust by the Indenture Trustee need not be segregated from other funds held by the Indenture Trustee except to the extent required by law or the terms of this Indenture, the Sale Agreement, the Servicing Agreement or the Administration Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; No provision of this Indenture shall require the Indenture Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayments of such funds or indemnity satisfactory to it against such risk or liability is not reasonably assured to it.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Indenture Trustee shall be subject to the provisions of this <u>Section 6.01</u> and to the provisions of the Trust Indenture Act.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; In the event that U.S. Bank Trust Company, National Association is also acting as Paying Agent or Storm Recovery Bond Registrar hereunder, the protections of this <u>Article VI</u> shall also be afforded to U.S. Bank Trust Company, National Association, in its capacity as Paying Agent or Storm Recovery Bond Registrar.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp; Except for the express duties of the Indenture Trustee with respect to the administrative functions set forth in the Basic Documents, the Indenture Trustee shall have no obligation to administer, service or collect Storm Recovery Property or to maintain, monitor or otherwise supervise the administration, servicing or collection of the Storm Recovery Charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp; Under no circumstance shall the Indenture Trustee be liable for any indebtedness of the Issuer, the Servicer or the Seller evidenced by or arising under the Storm Recovery Bonds or the Basic Documents. None of the provisions of this Indenture shall in any event require the Indenture Trustee to perform or be responsible for the performance of any of the Servicer's or Administrator's obligations under the Basic Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp; Commencing with March 15, 202[ ], on or before March 15th of each fiscal year ending December 31, so long as the Issuer is required to file Exchange Act reports, the Indenture Trustee shall (i) deliver to the Issuer a report (in form and substance reasonably satisfactory to the Issuer and addressed to the Issuer and signed by an authorized officer of the Indenture Trustee) regarding the Indenture Trustee's assessment of compliance, during the preceding fiscal year ended December 31, with each of the applicable servicing criteria specified on <u>Exhibit C</u> as required under Rule 13a-18 and Rule 15d-18 under the Exchange Act and Item 1122 of Regulation AB and (ii) deliver to the Issuer a report of an Independent registered public accounting firm reasonably acceptable to the Issuer that attests to and reports on, in accordance with Rule 1-02(a)(3) and Rule 2-02(g) of Regulation S-X under the Securities Act and the Exchange Act, the assessment of compliance made by the Indenture Trustee and delivered pursuant to <u>Section 6.01(l)(i)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp; Any discretion, permissive right or privilege of the Indenture Trustee hereunder shall not be deemed to be or otherwise construed as a duty or obligation.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee's receipt of publicly available reports hereunder shall not constitute constructive or actual notice or knowledge of any information contained therein or determinable therefrom, including but not limited to a party's compliance with covenants under the Indenture.

SECTION 6.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Rights of Indenture Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may conclusively rely and shall be fully protected in relying on any document believed by it to be genuine and to have been signed or presented by the proper person. The Indenture Trustee need not investigate any fact or matter stated in such document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Before the Indenture Trustee acts or refrains from acting, it may require and shall be entitled to receive an Officer's Certificate or an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Seller or external counsel of the Issuer, and which shall be reasonably satisfactory to the Indenture Trustee, (at no cost or expense to the Indenture Trustee) that such action is required or permitted hereunder. The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on such Officer's Certificate or Opinion of Counsel.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys or a custodian or nominee, and the Indenture Trustee shall not be responsible for any misconduct or negligence on the part of, or for the supervision of, any such agent, attorney, custodian or nominee appointed with due care by it hereunder. The Indenture Trustee shall give prompt written notice to the Issuer, in which case the Issuer shall then give prompt written notice to the Rating Agencies, of the appointment of any such agent, custodian or nominee to whom it delegates any of its express duties under this Indenture; <u>provided</u>, that the Indenture Trustee shall not be obligated to give such notice (i) if the Issuer or the Holders have directed the Indenture Trustee to appoint such agent, custodian or nominee (in which event the Issuer shall give prompt notice to the Rating Agencies of any such direction) or (ii) of the appointment of any agents, custodians or nominees made at any time that an Event of Default of the Issuer has occurred and is continuing.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be liable for any action it takes or omits to take in good faith that it believes to be authorized or within its rights or powers; <u>provided</u>, <u>however</u>, that the Indenture Trustee's conduct does not constitute willful misconduct, negligence or bad faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may consult with counsel, accountants and other experts, and the advice or opinion of counsel with respect to legal matters and such accountants or other experts with respect to other matters relating to this Indenture and the Storm Recovery Bonds shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel, accountants or other experts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall be under no obligation (i) to take any action or exercise any of the rights or powers vested in it by this Indenture or any other Basic Document at the request or direction of any Holders pursuant to this Indenture or (ii) to institute, conduct or defend any litigation hereunder or thereunder or in relation hereto or thereto, at the request, order or direction of any of the Holders pursuant to the provisions of this Indenture and the Series Supplement or otherwise, unless it shall have received security or indemnity satisfactory to it against the costs, expenses and liabilities that may be incurred.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may conclusively rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h)&nbsp;&nbsp;&nbsp;&nbsp; Any request or direction of the Issuer mentioned herein shall be sufficiently evidenced by an Issuer Request or an Issuer Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; Whenever in the administration of this Indenture the Indenture Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Indenture Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its part, conclusively rely upon an Officer's Certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k)&nbsp;&nbsp;&nbsp;&nbsp; In no event shall the Indenture Trustee be responsible or liable for special, indirect or consequential loss or damage of any kind whatsoever (including loss of profit) irrespective of whether the Indenture Trustee has been advised of the likelihood of such loss or damage and regardless of the form of action.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l)&nbsp;&nbsp;&nbsp;&nbsp; In no event shall the Indenture Trustee be responsible or liable for any failure or delay in the performance of its obligations hereunder arising out of or caused by, directly or indirectly, forces beyond its control, including strikes, work stoppages, accidents, acts of war or terrorism, civil or military disturbances, pandemics or epidemics, nuclear or natural catastrophes or acts of God, and interruptions, loss or malfunctions of utilities, communications or computer (software and hardware) services, it being understood that the Indenture Trustee shall use reasonable efforts that are consistent with accepted practices in the banking industry to resume performance as soon as practicable under the circumstances.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be deemed to have notice of any Servicer Default, Default or Event of Default unless it has actual knowledge or written notice of any event which is in fact such a default is received by a Responsible Officer of the Indenture Trustee at the Corporate Trust Office of the Indenture Trustee, and such notice references the Storm Recovery Bonds and this Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n)&nbsp;&nbsp;&nbsp;&nbsp; The rights, privileges, protections, immunities and benefits given to the Indenture Trustee, including, without limitation, its right to be indemnified, are extended to, and shall be enforceable by, the Indenture Trustee in each of its capacities hereunder, and each agent, custodian and other Person employed to act hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(o)&nbsp;&nbsp;&nbsp;&nbsp; Beyond the exercise of reasonable care in the custody thereof, the Indenture Trustee will have no duty as to any Storm Recovery Collateral in its possession or control or in the possession or control of any agent or bailee or any income thereon or as to preservation of rights against prior parties or any other rights pertaining thereto. The Indenture Trustee will be deemed to have exercised reasonable care in the custody of the Storm Recovery Collateral in its possession if the Storm Recovery Collateral is accorded treatment substantially equal to that which it accords its own property, and the Indenture Trustee will not be liable or responsible for any loss or diminution in the value of any of the Storm Recovery Collateral by reason of the act or omission of any carrier, forwarding agency or other agent or bailee selected by the Indenture Trustee in good faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(p)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee will not be responsible for the existence, genuineness or value of any of the Storm Recovery Collateral or for the validity, sufficiency, perfection, priority or enforceability of the Liens in any of the Storm Recovery Collateral, except to the extent such action or omission constitutes negligence or willful misconduct on the part of the Indenture Trustee. The Indenture Trustee shall not be responsible for the validity of the title of any grantor to the collateral, for insuring the Storm Recovery Collateral or for the payment of taxes, charges, assessments or liens upon the Storm Recovery Collateral or otherwise as to the maintenance of the Storm Recovery Collateral.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(q)&nbsp;&nbsp;&nbsp;&nbsp; In the event that the Indenture Trustee is required to acquire title to an asset for any reason, or take any managerial action of any kind in regard thereto, in order to carry out any fiduciary or trust obligation for the benefit of another, which in the Indenture Trustee's sole discretion may cause the Indenture Trustee, as applicable, to be considered an "owner or operator" under any environmental laws or otherwise cause the Indenture Trustee to incur, or be exposed to, any environmental liability or any liability under any other federal, state or local law, the Indenture Trustee reserves the right, instead of taking such action, either to resign as Indenture Trustee or to arrange for the transfer of the title or control of the asset to a court appointed receiver. The Indenture Trustee will not be liable to any person for any environmental claims or any environmental liabilities or contribution actions under any federal, state or local law, rule or regulation by reason of the Indenture Trustee's actions and conduct as authorized, empowered and directed hereunder or relating to any kind of discharge or release or threatened discharge or release of any hazardous materials into the environment.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(r)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be liable for failure to perform its duties hereunder if such failure is a direct or proximate result of another party's failure to perform its own obligations hereunder.

SECTION 6.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Individual Rights of Indenture Trustee</u>. The Indenture Trustee in its individual or any other capacity may become the owner or pledgee of Storm Recovery Bonds and may otherwise deal with the Issuer or its Affiliates with the same rights it would have if it were not Indenture Trustee. Any Paying Agent, Storm Recovery Bond Registrar, co-registrar or co-paying agent or agent appointed under <u>Section 3.02</u> may do the same with like rights. However, the Indenture Trustee must comply with <u>Section 6.11</u> and <u>Section 6.12</u>.

SECTION 6.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Indenture Trustee's Disclaimer</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be responsible for and makes no representation (other than as set forth in <u>Section 6.13</u>) as to the validity or adequacy of this Indenture or the Storm Recovery Bonds, it shall not be accountable for the Issuer's use of the proceeds from the Storm Recovery Bonds, and it shall not be responsible for any statement of the Issuer in this Indenture or in any document issued in connection with the sale of the Storm Recovery Bonds or in the Storm Recovery Bonds other than the Indenture Trustee's certificate of authentication. The Indenture Trustee shall not be responsible for the form, character, genuineness, sufficiency, value or validity of any of the Collateral (or for the perfection or priority of the Liens thereon), or for or in respect of the Storm Recovery Bonds (other than the certificate of authentication for the Storm Recovery Bonds) or the Basic Documents, the filing of any financing statements, the recording of any documents or otherwise perfecting the security interest in the Collateral, and the Indenture Trustee shall in no event assume or incur any liability, duty or obligation to any Holder, other than as expressly provided in this Indenture. The Indenture Trustee shall not be liable for the default or misconduct of the Issuer, the Seller or the Servicer under the Basic Documents or otherwise, and the Indenture Trustee shall have no obligation or liability to perform the obligations of such Persons.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall not be responsible for (i) the validity of the title of the Issuer to the Collateral, (ii) insuring the Collateral or (iii) the payment of taxes, charges, assessments or Liens upon the Collateral or otherwise as to the maintenance of the Collateral. The Indenture Trustee shall have no duty to ascertain or inquire as to the performance or observance of any of the terms of this Indenture or any of the other Basic Documents. The Indenture Trustee shall not be responsible for filing any financing or continuation statements or recording any documents or instruments in any public office at any time or times or otherwise perfecting or maintaining the perfection of any security interest in the Collateral.

SECTION 6.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Notice of Defaults</u>. If a Default occurs and is continuing and if it is actually known to a Responsible Officer of the Indenture Trustee or a Responsible Officer of the Indenture Trustee has been notified in writing of such Default, the Indenture Trustee shall deliver to each Rating Agency (or otherwise make available by posting such notice to the Indenture Trustee's website at https://pivot.usbank.com), to the Commission (pursuant to <u>Section 10.04(e)</u>) and each Holder of Storm Recovery Bonds notice of the Default within ten Business Days after actual notice of such Default was received by a Responsible Officer of the Indenture Trustee (provided that the Indenture Trustee shall give the Rating Agencies prompt notice of any payment default in respect of the Storm Recovery Bonds). Except in the case of a Default in payment of principal of and premium, if any, or interest on any Storm Recovery Bond, the Indenture Trustee may withhold the notice of the Default if and so long as a committee of its Responsible Officers in good faith determines that withholding such notice is in the interests of Holders. In no event shall the Indenture Trustee be deemed to have knowledge of a Default unless a Responsible Officer of the Indenture Trustee shall have actual knowledge of a Default or shall have received written notice thereof.

SECTION 6.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Reports by Indenture Trustee to Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; So long as Storm Recovery Bonds are Outstanding and the Indenture Trustee is the Storm Recovery Bond Registrar and Paying Agent, upon the written request of any Holder or the Issuer, within the prescribed period of time for tax reporting purposes after the end of each calendar year, the Indenture Trustee shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or state tax returns. If the Storm Recovery Bond Registrar and Paying Agent is other than the Indenture Trustee, such Storm Recovery Bond Registrar and Paying Agent, within the prescribed period of time for tax reporting purposes after the end of each calendar year, shall deliver to each relevant current or former Holder such information in its possession as may be required to enable such Holder to prepare its U.S. federal income and any applicable local or state tax returns.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; On or prior to each Payment Date or Special Payment Date therefor, the Indenture Trustee will deliver to each Holder of the Storm Recovery Bonds on such Payment Date or Special Payment Date and the Commission a statement as provided to the Issuer and the Indenture Trustee and prepared by the Servicer, which will include (to the extent applicable) the following information (and any other information so specified in the Series Supplement) as to the Storm Recovery Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the amount of the payment to Holders allocable to principal, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;the amount of the payment to Holders allocable to interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the aggregate Outstanding Amount of the Storm Recovery Bonds, before and after giving effect to any payments allocated to principal reported under <u>Section 6.06(b)(i)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the difference, if any, between the amount specified in <u>Section 6.06(b)(iii)</u> and the Outstanding Amount specified in the related Expected Sinking Fund Schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;any other transfers and payments to be made on such Payment Date, Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) the amount paid or to be paid to the Indenture Trustee since the preceding Payment Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) the amount paid or to be paid to the Servicer since the preceding Payment Date; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix) the amount of any other transfers and payments made pursuant to this Indenture or the Series Supplement since the preceding Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall send a copy of each of the Certificate of Compliance delivered to it pursuant to <u>Section 3.03</u> of the Servicing Agreement and the Annual Accountant's Report delivered to it pursuant to <u>Section 3.04</u> of the Servicing Agreement to the Commission, the Rating Agencies, the Indenture Trustee and to the Servicer for posting on the 17g-5 Website in accordance with Rule 17g-5 under the Exchange Act. A copy of such certificate and report may be obtained by any Holder by a request in writing to the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may consult with counsel and the advice or opinion of such counsel with respect to legal matters relating to this Indenture and the Storm Recovery Bonds shall be full and complete authorization and protection from liability with respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. Any reasonable legal fees incurred by the Indenture Trustee shall be payable to the Indenture Trustee from amounts hold in the Collection Account in accordance with the provisions set forth in <u>Section 8.02(e)</u>.

SECTION 6.07.&nbsp;&nbsp;&nbsp;&nbsp; <u>Compensation and Indemnity</u>. The Issuer shall pay to the Indenture Trustee from time to time reasonable compensation for its services. The Indenture Trustee's compensation shall not, to the extent permitted by law, be limited by any law on compensation of a trustee of an express trust. The Issuer shall reimburse the Indenture Trustee for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Indenture Trustee's agents, counsel, accountants and experts. The Issuer shall indemnify and hold harmless the Indenture Trustee and its officers, directors, employees and agents against any and all cost, damage, loss, liability, tax or expense (including reasonable attorneys' fees and expenses) incurred by it in connection with the administration and the enforcement of this Indenture, the Series Supplement and the other Basic Documents and the Indenture Trustee's rights, powers and obligations under this Indenture, the Series Supplement and the other Basic Documents and the performance of its duties hereunder and thereunder and obligations (including the costs of defending any claim or bringing any claim to enforce the Issuer's indemnification obligations hereunder) under or pursuant to this Indenture, the Series Supplement and the other Basic Documents other than any such tax on the compensation of the Indenture Trustee for its services as Indenture Trustee. The Indenture Trustee shall notify the Issuer as soon as is reasonably practicable of any claim for which it may seek indemnity. Failure by the Indenture Trustee to so notify the Issuer shall not relieve the Issuer of its obligations hereunder. The Issuer shall defend the claim, the Indenture Trustee may have separate counsel, and the Issuer shall pay the reasonable fees and expenses of such counsel. The Issuer need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indenture Trustee through the Indenture Trustee's own willful misconduct, negligence or bad faith.

The payment obligations to the Indenture Trustee pursuant to this <u>Section 6.07</u> shall survive the discharge of this Indenture and Series Supplement or the earlier resignation or removal of the Indenture Trustee. When the Indenture Trustee incurs expenses after the occurrence of a Default specified in <u>Section 5.01(e)</u> or <u>Section 5.01(f)</u> with respect to the Issuer, the expenses are intended to constitute expenses of administration under the Bankruptcy Code or any other applicable U.S. federal or state bankruptcy, insolvency or similar law.

SECTION 6.08.&nbsp;&nbsp;&nbsp;&nbsp; <u>Replacement of Indenture Trustee and Securities Intermediary and the Account Bank</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may resign at any time upon 30 days' prior written notice to the Issuer subject to <u>Section 6.08(c)</u>. The Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds may remove the Indenture Trustee by so notifying the Indenture Trustee not less than 31 days prior to the date of removal and may appoint a successor Indenture Trustee. The Issuer shall remove the Indenture Trustee if:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; the Indenture Trustee fails to comply with <u>Section 6.11</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;the Indenture Trustee is adjudged a bankrupt or insolvent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;a receiver or other public officer takes charge of the Indenture Trustee or its property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) the Indenture Trustee otherwise becomes incapable of acting; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;the Indenture Trustee fails to provide to the Issuer any information reasonably requested by the Issuer pertaining to the Indenture Trustee and necessary for the Issuer or the Sponsor to comply with its respective reporting obligations under the Exchange Act and Regulation AB and such failure is not resolved to the Issuer's and the Indenture Trustee's mutual satisfaction within a reasonable period of time.

Any removal or resignation of the Indenture Trustee shall also constitute a removal or resignation of the Securities Intermediary and the Account Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; If the Indenture Trustee gives notice of resignation or is removed or if a vacancy exists in the office of Indenture Trustee for any reason (the Indenture Trustee in such event being referred to herein as the retiring Indenture Trustee), the Issuer shall promptly appoint a successor Indenture Trustee and Securities Intermediary and the Account Bank.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; A successor Indenture Trustee shall deliver a written acceptance of its appointment as the Indenture Trustee and as the Securities Intermediary and as Account Bank to the retiring Indenture Trustee and to the Issuer. Thereupon the resignation or removal of the retiring Indenture Trustee shall become effective, and the successor Indenture Trustee shall have all the rights, powers and duties of the Indenture Trustee, Securities Intermediary and the Account Bank, as applicable, under this Indenture and the other Basic Documents. No resignation or removal of the Indenture Trustee pursuant to this <u>Section 6.08</u> shall become effective until acceptance of the appointment by a successor Indenture Trustee having the qualifications set forth in <u>Section 6.11</u>. Notice of any such appointment shall be promptly given to each Rating Agency by the successor Indenture Trustee. The successor Indenture Trustee shall mail a notice of its succession to Holders. The retiring Indenture Trustee shall promptly transfer all property held by it as Indenture Trustee to the successor Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; If a successor Indenture Trustee does not take office within 60 days after the retiring Indenture Trustee resigns or is removed, the retiring Indenture Trustee, the Issuer or the Holders of a majority in Outstanding Amount of the Storm Recovery Bonds may petition any court of competent jurisdiction for the appointment of a successor Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; If the Indenture Trustee fails to comply with <u>Section 6.11</u>, any Holder may petition any court of competent jurisdiction for the removal of the Indenture Trustee and the appointment of a successor Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding the replacement of the Indenture Trustee pursuant to this <u>Section 6.08</u>, the Issuer's obligations under <u>Section 6.07</u> shall continue for the benefit of the retiring Indenture Trustee.

SECTION 6.09.&nbsp;&nbsp;&nbsp;&nbsp; <u>Successor Indenture Trustee by Merger</u>. If the Indenture Trustee consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation or banking association without any further act shall be the successor Indenture Trustee; <u>provided</u>, <u>however</u>, that, if such successor Indenture Trustee is not eligible under <u>Section 6.11</u>, then the successor Indenture Trustee shall be replaced in accordance with <u>Section 6.08</u>. Notice of any such event shall be promptly given to each Rating Agency by the successor Indenture Trustee.

SECTION 6.10.&nbsp;&nbsp;&nbsp;&nbsp; <u>Appointment of Co-Trustee or Separate Trustee</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Every separate trustee and co-trustee shall, to the extent permitted by law, be appointed and act subject to the following provisions and conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; all rights, powers, duties and obligations conferred or imposed upon the Indenture Trustee shall be conferred or imposed upon and exercised or performed by the Indenture Trustee and such separate trustee or co-trustee jointly (it being understood that such separate trustee or co-trustee is not authorized to act separately without the Indenture Trustee joining in such act), except to the extent that under any law of any jurisdiction in which any particular act or acts are to be performed the Indenture Trustee shall be incompetent or unqualified to perform such act or acts, in which event such rights, powers, duties and obligations (including the holding of title to the Collateral or any portion thereof in any such jurisdiction) shall be exercised and performed singly by such separate trustee or co-trustee, but solely at the direction of the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;no trustee hereunder shall be personally liable by reason of any act or omission of any other trustee hereunder; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Indenture Trustee may at any time accept the resignation of or remove any separate trustee or co-trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; Any notice, request or other writing given to the Indenture Trustee shall be deemed to have been given to each of the then-separate trustees and co-trustees, as effectively as if given to each of them. Every instrument appointing any separate trustee or co-trustee shall refer to this Indenture and the conditions of this <u>Article VI</u>. Each separate trustee and co-trustee, upon its acceptance of the trusts conferred, shall be vested with the estates or property specified in its instrument of appointment, either jointly with the Indenture Trustee or separately, as may be provided therein, subject to all the provisions of this Indenture, specifically including every provision of this Indenture relating to the conduct of, affecting the liability of, or affording protection to, the Indenture Trustee. Every such instrument shall be filed with the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Any separate trustee or co-trustee may at any time constitute the Indenture Trustee, its agent or its attorney-in-fact with full power and authority, to the extent not prohibited by law, to do any lawful act under or in respect of this Indenture on its behalf and in its name. If any separate trustee or co-trustee shall die, become incapable of acting, resign or be removed, all of its estates, properties, rights, remedies and trusts shall vest in and be exercised by the Indenture Trustee, to the extent permitted by law, without the appointment of a new or successor trustee.

SECTION 6.11.&nbsp;&nbsp;&nbsp;&nbsp; <u>Eligibility; Disqualification</u>. The Indenture Trustee shall at all times satisfy the requirements of Section 310(a)(1) of the Trust Indenture Act, Section 310(a)(5) of the Trust Indenture Act and Rule 3a-7 of the Investment Company Act. The Indenture Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition and shall have a long-term issuer rating from Moody's in one of its generic rating categories that signifies investment grade and a long-term issuer rating from S&P of at least "A." The Indenture Trustee shall comply with Section 310(b) of the Trust Indenture Act, including the optional provision permitted by the second sentence of Section 310(b)(9) of the Trust Indenture Act; <u>provided</u>, <u>however</u>, that there shall be excluded from the operation of Section 310(b)(1) of the Trust Indenture Act any indenture or indentures under which other securities of the Issuer are outstanding if the requirements for such exclusion set forth in Section 310(b)(1) of the Trust Indenture Act are met.

SECTION 6.12.&nbsp;&nbsp;&nbsp;&nbsp; <u>Preferential Collection of Claims Against Issuer</u>. The Indenture Trustee shall comply with Section 311(a) of the Trust Indenture Act, excluding any creditor relationship listed in Section 311(b) of the Trust Indenture Act. An Indenture Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated therein.

SECTION 6.13.&nbsp;&nbsp;&nbsp;&nbsp; <u>Representations and Warranties of Indenture Trustee</u>. The Indenture Trustee hereby represents and warrants as of the date hereof that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; the Indenture Trustee is a national banking association duly organized and validly existing under the laws of the United States of America; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; the Indenture Trustee has full power, authority and legal right to execute, deliver and perform its obligations under this Indenture and the other Basic Documents to which the Indenture Trustee is a party and has taken all necessary action to authorize the execution, delivery and performance of obligations by it of this Indenture and such other Basic Documents.

SECTION 6.14.&nbsp;&nbsp;&nbsp;&nbsp; <u>Annual Report by Independent Registered Public Accountants</u>. The Indenture Trustee hereby covenants that it will cooperate fully with the firm of Independent registered public accountants performing the procedures required under Section 3.04 of the Servicing Agreement, it being understood and agreed that the Indenture Trustee will so cooperate in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures.

SECTION 6.15.&nbsp;&nbsp;&nbsp;&nbsp; <u>Custody of Collateral</u>. The Indenture Trustee shall hold such of the Collateral (and any other collateral that may be granted to the Indenture Trustee) as consists of instruments, deposit accounts, negotiable documents, money, goods, letters of credit and advices of credit in the State of New York. The Indenture Trustee shall hold such of the Collateral as constitute investment property through the Securities Intermediary (which, as of the date hereof, is U.S. Bank National Association). The initial Securities Intermediary hereby agrees (and each future Securities Intermediary shall agree) with the Indenture Trustee that (a) such investment property (other than cash) shall at all times be credited to a securities account of the Indenture Trustee, (b) the Securities Intermediary shall treat the Indenture Trustee as entitled to exercise the rights that comprise each financial asset credited to such securities account, (c) all property (other than cash) credited to such securities account shall be treated as a financial asset, (d) the Securities Intermediary shall comply with entitlement orders originated by the Indenture Trustee without the further consent of any other Person, (e) the Securities Intermediary will not agree with any Person other than the Indenture Trustee to comply with entitlement orders originated by such other Person, (f) such securities accounts and the property credited thereto shall not be subject to any Lien or right of set-off in favor of the Securities Intermediary or anyone claiming through it (other than the Indenture Trustee) and (g) such agreement shall be governed by the internal laws of the State of New York. Terms used in the preceding sentence that are defined in the UCC and not otherwise defined herein shall have the meaning set forth in the UCC. Except as permitted by this <u>Section 6.15</u> or elsewhere in this Indenture, the Indenture Trustee shall not hold Collateral through an agent or a nominee.

SECTION 6.16.&nbsp;&nbsp;&nbsp;&nbsp; <u>FATCA</u>.

The Issuer agrees (i) to provide the Indenture Trustee with such reasonable information as it has in its possession to enable the Indenture Trustee to determine whether any payments pursuant to the Indenture are subject to the withholding requirements described in Section 1471(b) of the Code or otherwise imposed pursuant to Sections 1471 through 1474 of the Code and any regulations, or agreements thereunder or official interpretations thereof ("Applicable Law"), and (ii) that the Indenture Trustee shall be entitled to make any withholding or deduction from payments under the Indenture to the extent necessary to comply with Applicable Law, for which the Indenture Trustee shall not have any liability.

ARTICLE VII

Holders' Lists and Reports

SECTION 7.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Issuer To Furnish Indenture Trustee Names and Addresses of Holders</u>. The Issuer will furnish or cause to be furnished to the Indenture Trustee (a) not more than five days after the earlier of (i) each Record Date and (ii) six months after the last Record Date, a list, in such form as the Indenture Trustee may reasonably require, of the names and addresses of the Holders as of such Record Date, and (b) at such other times as the Indenture Trustee may request in writing, within 30 days after receipt by the Issuer of any such request, a list of similar form and content as of a date not more than ten days prior to the time such list is furnished; <u>provided</u>, <u>however</u>, that, so long as the Indenture Trustee is the Storm Recovery Bond Registrar, no such list shall be required to be furnished.

SECTION 7.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Preservation of Information; Communications to Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of the Holders contained in the most recent list furnished to the Indenture Trustee as provided in <u>Section 7.01</u> and the names and addresses of Holders received by the Indenture Trustee in its capacity as Storm Recovery Bond Registrar. The Indenture Trustee may destroy any list furnished to it as provided in <u>Section 7.01</u> upon receipt of a new list so furnished.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Holders may communicate pursuant to Section 312(b) of the Trust Indenture Act with other Holders with respect to their rights under this Indenture or under the Storm Recovery Bonds. In addition, upon the written request of any Holder or group of Holders or of all Outstanding Storm Recovery Bonds evidencing at least 10 percent of the Outstanding Amount of the Storm Recovery Bonds, as applicable, the Indenture Trustee shall afford the Holder or Holders making such request a copy of a current list of Holders for purposes of communicating with other Holders with respect to their rights hereunder; <u>provided</u>, that the Indenture Trustee gives prior written notice to the Issuer of such request.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer, the Indenture Trustee and the Storm Recovery Bond Registrar shall have the protection of Section 312(c) of the Trust Indenture Act.

SECTION 7.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Reports by Issuer</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer shall:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; so long as the Issuer or the Sponsor is required to file such documents with the SEC, provide to the Indenture Trustee and the Commission, within 15 days after the Issuer is required to file the same with the SEC, copies of the annual reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the SEC may from time to time by rules and regulations prescribe) that the Issuer or the Sponsor may be required to file with the SEC pursuant to Section 13 or 15(d) of the Exchange Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp; provide to the Indenture Trustee and the Commission and file with the SEC, in accordance with rules and regulations prescribed from time to time by the SEC, such additional information, documents and reports with respect to compliance by the Issuer with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp; supply to the Indenture Trustee (and the Indenture Trustee shall transmit to all Holders described in Section 313(c) of the Trust Indenture Act) and the Commission, such summaries of any information, documents and reports required to be filed by the Issuer pursuant to <u>Section 7.03(a)(i)</u> and <u>Section 7.03(a)(ii)</u> as may be required by rules and regulations prescribed from time to time by the SEC.

Except as may be provided by Section 313(c) of the Trust Indenture Act, the Issuer may fulfill its obligation to provide the materials described in this <u>Section 7.03(a)</u> by providing such materials in electronic format.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Unless the Issuer otherwise determines, the fiscal year of the Issuer shall end on December 31 of each year and will promptly notify the Indenture Trustee regarding any change in fiscal year.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; Delivery of such reports, information and documents to the Indenture Trustee is for informational purposes only and the Indenture Trustee's receipt of such shall not constitute actual or constructive notice or knowledge of any information contained therein or determinable from information contained therein, including the Issuer's compliance with any of its covenants hereunder (as to which the Indenture Trustee is entitled to rely exclusively on Officer's Certificates).

SECTION 7.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Reports by Indenture Trustee</u>. If required by Section 313(a) of the Trust Indenture Act, within 60 days after March 31 of each year, commencing with March 31, 202[ ], the Indenture Trustee shall send to each Holder as required by Section 313(c) of the Trust Indenture Act a brief report dated as of such date that complies with Section 313(a) of the Trust Indenture Act. The Indenture Trustee also shall comply with Section 313(b) of the Trust Indenture Act; <u>provided</u>, <u>however</u>, that the initial report if required to be so issued shall be delivered not more than 12 months after the initial issuance of the Storm Recovery Bonds.

A copy of each report at the time of its sending to Holders shall be filed by the Servicer with the SEC and each stock exchange, if any, on which the Storm Recovery Bonds are listed. The Issuer shall notify the Indenture Trustee in writing if and when the Storm Recovery Bonds are listed on any stock exchange.

ARTICLE VIII

Accounts, Disbursements and Releases

SECTION 8.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Collection of Money</u>. Except as otherwise expressly provided herein, the Indenture Trustee may demand payment or delivery of, and shall receive and collect, directly and without intervention or assistance of any fiscal agent or other intermediary, all money and other property payable to or receivable by the Indenture Trustee pursuant to this Indenture and the other Basic Documents. The Indenture Trustee shall apply all such money received by it as provided in this Indenture within two (2) Business Days. Except as otherwise expressly provided in this Indenture, if any default occurs in the making of any payment or performance under any agreement or instrument that is part of the Collateral, the Indenture Trustee may take such action as may be appropriate to enforce such payment or performance, subject to <u>Article VI</u>, including the institution and prosecution of appropriate Proceedings. Any such action shall be without prejudice to any right to claim a Default or Event of Default under this Indenture and any right to proceed thereafter as provided in <u>Article V</u>.

SECTION 8.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Collection Account</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; Prior to the Closing Date issued hereunder, the Issuer shall open or cause to be opened with the Securities Intermediary located at the Indenture Trustee's office, or at another Eligible Institution, one or more segregated trust accounts in the Indenture Trustee's name for the deposit of Storm Recovery Charge Collections for Bonds and all other amounts received with respect to the Storm Recovery Collateral servicing the Bonds (the "<u>Collection Account</u>" and collectively, the "<u>Collection Accounts</u>"). The Indenture Trustee shall hold the Collection Account for the benefit of the related Holders, the Indenture Trustee and the other persons indemnified hereunder. There shall be established by the Indenture Trustee in respect of each Collection Account three subaccounts: a general subaccount (the "<u>General Subaccount</u>"); an excess funds subaccount (the "<u>Excess Funds Subaccount</u>"); a capital subaccount (the "<u>Capital Subaccount</u>" and, together with the General Subaccount and the Excess Funds Subaccount, the "<u>Subaccounts</u>"). For administrative purposes, the Subaccounts may be established by the Securities Intermediary as separate accounts. Such separate accounts will be recognized individually as a Subaccount and collectively as the "Collection Account". Prior to or concurrently with the issuance of the Storm Recovery Bonds, the Member shall deposit into the Capital Subaccount an amount equal to the Required Capital Level. All amounts in the Collection Account not allocated to any other subaccount shall be allocated to the General Subaccount. Prior to the initial Payment Date, all amounts in the Collection Account (other than funds deposited into the Capital Subaccount up to the Required Capital Level) shall be allocated to the General Subaccount. All references to a Collection Account shall be deemed to include reference to all subaccounts contained therein. Withdrawals from and deposits to each of the foregoing subaccounts of the Collection Account shall be made as set forth in <u>Sections 8.02(d)</u> and <u>8.02(e)</u>. The Collection Account shall at all times be maintained in an Eligible Account and will be under the sole dominion and exclusive control of the Indenture Trustee, through the Securities Intermediary, and only the Indenture Trustee shall have access to the applicable Collection Account for the purpose of making deposits in and withdrawals from the applicable Collection Account in accordance with this Indenture. Funds in a Collection Account shall not be commingled with any other moneys. All moneys deposited from time to time in the Collection Account, all deposits therein pursuant to this Indenture and all investments made in Eligible Investments as directed in writing by the Issuer with such moneys, including all income or other gain from such investments, shall be held by the Securities Intermediary in the Collection Account as part of the Storm Recovery Collateral as herein provided. The Indenture Trustee shall have no investment discretion. Absent written instructions to invest, funds shall remain uninvested. The Securities Intermediary shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The Securities Intermediary hereby confirms that (i) each Collection Account is, or at inception will be established as, a "securities account" as such term is defined in Section 8-501(a) of the UCC, (ii) it is a "securities intermediary" (as such term is defined in Section 8-102(a)(14) of the UCC) and is acting in such capacity with respect to such accounts, (iii) the Indenture Trustee for the benefit of the Secured Parties is the sole "entitlement holder" (as such term is defined in Section 8-102(a)(7) of the UCC) with respect to such accounts and (iv) no other Person shall have the right to give "entitlement orders" (as such term is defined in Section 8-102(a)(8)) with respect to such accounts. The Securities Intermediary hereby further agrees that each item of property (whether investment property, financial asset, security, instrument or cash) received by it will be credited to the applicable Collection Account and shall be treated by it as a "financial asset" within the meaning of Section 8-102(a)(9) of the UCC. Notwithstanding anything to the contrary, the State of New York shall be deemed to be the jurisdiction of the Securities Intermediary for purposes of Section 8-110 of the UCC, and the Collection Accounts (as well as the securities entitlements related thereto) shall be governed by the laws of the State of New York.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall have sole dominion and exclusive control over all moneys in the applicable Collection Account through the Securities Intermediary and shall apply such amounts therein as provided in this <u>Section 8.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Storm Recovery Charge Collections shall be deposited in the applicable General Subaccount as provided in <u>Section 6.11</u> of the Servicing Agreement. All deposits to and withdrawals from the Collection Account, all allocations to the subaccounts of the Collection Account and any amounts to be paid to the Servicer under <u>Section 8.02(e)</u> shall be made by the Indenture Trustee in accordance with the written instructions provided by the Servicer in the Monthly Servicer's Certificate or the Semi-Annual Servicer's Certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; On each Payment Date for Bonds, the Indenture Trustee shall apply all amounts on deposit in the applicable Collection Account, including all Investment Earnings thereon, in accordance with the Semi-Annual Servicer's Certificate, in the following priority:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; payment of the Indenture Trustee's fees, expenses and outstanding indemnity amounts shall be paid to the Indenture Trustee (subject to <u>Section 6.07</u>) in an amount not to exceed the amount set forth in the Series Supplement (the "Indenture Trustee Cap"); <u>provided, however</u>, that the Indenture Trustee Cap shall be disregarded and inapplicable upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;payment of the Servicing Fee with respect to such Payment Date, plus any unpaid Servicing Fees for prior Payment Dates shall be paid to the Servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) payment of the Administration Fee for such Payment Date shall be paid to the Administrator and the Independent Manager Fee for such Payment Date shall be paid to the Independent Managers, and in each case with any unpaid Administration Fees or Independent Manager Fees from prior Payment Dates;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) payment of all other ordinary periodic Operating Expenses for such Payment Date not described above shall be paid to the parties to which such Operating Expenses are owed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;payment of Periodic Interest for such Payment Date, including any overdue Periodic Interest (together with, to the extent lawful, interest on such overdue Periodic Interest at the applicable Bond Interest Rate), with respect to the Storm Recovery Bonds shall be paid to the Holders of Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;&nbsp;&nbsp;payment of the principal required to be paid on the Storm Recovery Bonds on the Final Maturity Date for such Tranche or as a result of an acceleration upon an Event of Default shall be paid to the Holders of Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) payment of Periodic Principal for such Payment Date in accordance with the expected sinking fund schedule, including any previously unpaid Periodic Principal, with respect to the Storm Recovery Bonds shall be paid to the Holders of Storm Recovery Bonds, pro rata if there is a deficiency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) payment of the allocable share of any other unpaid Operating Expenses (including any such amounts owed to the Indenture Trustee, but unpaid due to the limitation in <u>Section 8.02(e)(i)</u>) and any remaining amounts owed pursuant to the Basic Documents shall be paid to the parties to which such Operating Expenses or remaining amounts are owed;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;&nbsp;&nbsp;&nbsp;replenishment of the amount, if any, by which the Required Capital Level exceeds the amount in the Capital Subaccount as of such Payment Date shall be allocated to the Capital Subaccount;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;&nbsp;&nbsp; the Return on Invested Capital then due and payable shall be paid to Duke Energy Carolinas;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)&nbsp;&nbsp;&nbsp;&nbsp;the balance, if any, shall be allocated to the Excess Funds Subaccount; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xii) after the Storm Recovery Bonds have been paid in full and discharged, and all of the other foregoing amounts are paid in full, together with all amounts due and payable to the Indenture Trustee under <u>Section 6.07</u> or otherwise, the balance (including all amounts then held in the Capital Subaccount and the Excess Funds Subaccount), if any, shall be paid to the Issuer, free from the Lien of this Indenture and the applicable Series Supplement.

All payments to the Holders of the Storm Recovery Bonds pursuant to <u>Section 8.02(e)(v)</u>, <u>Section 8.02(e)(vi)</u> and <u>Section 8.02(e)(vii)</u> shall be made to such Holders pro rata based on the respective amounts of interest and/or principal owed, unless, in the case of the Storm Recovery Bonds comprised of two or more Tranches, the Series Supplement provides otherwise. Payments in respect of principal of and premium, if any, and interest on any Tranche of Storm Recovery Bonds will be made on a pro rata basis among all the Holders of such Tranche. In the case of an Event of Default, then, in accordance with <u>Section 5.04(c)</u>, in respect of any application of moneys pursuant to <u>Section 8.02(e)(v)</u> or <u>Section 8.02(e)(vi)</u>, moneys will be applied pursuant to <u>Section 8.02(e)(v)</u> and <u>Section 8.02(e)(vi)</u>, as the case may be, in such order, on a pro rata basis, based upon the interest or the principal owed.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; If on any Payment Date, or, for any amounts payable under <u>Section 8.02(e)(i)</u>, <u>Section 8.02(e)(ii)</u>, <u>Section 8.02(e)(iii)</u> and <u>Section 8.02(e)(iv)</u>, on any Business Day, funds on deposit in the General Subaccount are insufficient to make the payments contemplated by <u>Section 8.02(e)(i)</u>, <u>Section 8.02(e)(ii)</u>, <u>Section 8.02(e)(iii)</u>, <u>Section 8.02(e)(iv)</u>, <u>Section 8.02(e)(v)</u>, <u>Section 8.02(e)(vi)</u>, <u>Section 8.02(e)(vii), Section 8.02(e)(viii)</u> and <u>Section 8.02(e)(ix),</u> the Indenture Trustee shall (i) <u>first</u>, draw from amounts on deposit in the Excess Funds Subaccount, and (ii) <u>second</u>, draw from amounts on deposit in the Capital Subaccount, in each case, up to the amount of such shortfall in order to make the payments contemplated by <u>Section 8.02(e)(i)</u>, <u>Section 8.02(e)(ii)</u>, <u>Section 8.02(e)(iii)</u>, <u>Section 8.02(e)(iv)</u>, <u>Section 8.02(e)(v)</u>, <u>Section 8.02(e)(vi)</u>, <u>Section 8.02(e)(vii)</u> and <u>Section 8.02(e)(viii)</u>. In addition, if on any Payment Date funds on deposit in the General Subaccount are insufficient to make the allocations contemplated by <u>Section 8.02(e)(ix)</u>, the Indenture Trustee shall draw any amounts on deposit in the Excess Funds Subaccount to make such allocations to the Capital Subaccount.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g)&nbsp;&nbsp;&nbsp;&nbsp; With respect to any Operating Expense payable by the Issuer (but only as described in <u>Section 8.02(e)(i)</u>, <u>Section 8.02(e)(ii)</u>, <u>Section 8.02(e)(iii)</u> and <u>Section 8.02(e)(iv)</u>) that will become due and payable prior to the next Payment Date, the Administrator, on any Business Day, may direct the Indenture Trustee in writing to remit payment of such Operating Expense, in the amount specified in the written direction, on the next Payment Date from amounts on deposit in the General Subaccount, the Excess Funds Subaccount and the Capital Subaccount, in that order, all as specified in the written direction to the Indenture Trustee.

SECTION 8.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>General Provisions Regarding the Collection Account</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; So long as no Default or Event of Default shall have occurred and be continuing, all or a portion of the funds in the Collection Account shall be invested in Eligible Investments and reinvested by the Indenture Trustee upon Issuer Order; <u>provided</u>, <u>however</u>, that such Eligible Investments shall not mature or be redeemed later than the Business Day prior to the next Payment Date or Special Payment Date for the related Tranche, if applicable, for the Storm Recovery Bonds. All income or other gain from investments of moneys deposited in the Collection Account shall be deposited by the Indenture Trustee in such Collection Account, and any loss resulting from such investments shall be charged to the Collection Account. The Issuer will not direct the Indenture Trustee to make any investment of any funds or to sell any investment held in any Collection Account unless the security interest Granted and perfected in such account will continue to be perfected in such investment or the proceeds of such sale, in either case without any further action by any Person, and, in connection with any direction to the Indenture Trustee to make any such investment or sale, if requested by the Indenture Trustee, the Issuer shall deliver to the Indenture Trustee an Opinion of Counsel of external counsel of the Issuer (at the Issuer's cost and expense) to such effect. In no event shall the Indenture Trustee be liable for the selection of Eligible Investments or for investment losses incurred thereon. The Indenture Trustee shall have no liability in respect of losses incurred as a result of the liquidation of any Eligible Investment prior to its stated maturity or its date of redemption or the failure of the Issuer or the Servicer to provide timely written investment direction. The Indenture Trustee shall have no obligation to invest or reinvest any amounts held hereunder in the absence of written investment direction pursuant to an Issuer Order, in which case such amount shall remain uninvested.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Subject to <u>Section 6.01(c)</u>, the Indenture Trustee shall not in any way be held liable by reason of any insufficiency in the Collection Account resulting from any loss on any Eligible Investment included therein except for losses attributable to the Indenture Trustee's failure to make payments on such Eligible Investments issued by the Indenture Trustee, in its commercial capacity as principal obligor and not as trustee, in accordance with their terms.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; If (i) the Issuer shall have failed to give written investment directions for any funds on deposit in the Collection Account to the Indenture Trustee by 11:00 a.m. New York City time (or such other time as may be agreed by the Issuer and Indenture Trustee) on any Business Day or (ii) a Default or Event of Default shall have occurred and be continuing with respect to the Storm Recovery Bonds but the Storm Recovery Bonds shall not have been declared due and payable pursuant to <u>Section 5.02</u>, then the Indenture Trustee shall, to the fullest extent practicable, invest and reinvest funds in such Collection Account in Eligible Investments specified in the most recent written investment directions delivered by the Issuer to the Indenture Trustee; <u>provided</u>, that if the Issuer has never delivered written investment directions to the Indenture Trustee, the Indenture Trustee shall not invest or reinvest such funds in any investments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; The parties hereto acknowledge that the Servicer may, pursuant to the Servicing Agreement, select Eligible Investments on behalf of the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; Except as otherwise provided hereunder or agreed in writing among the parties hereto, the Issuer shall retain the authority to institute, participate and join in any plan of reorganization, readjustment, merger or consolidation with respect to the issuer of any Eligible Investments held hereunder, and, in general, to exercise each and every other power or right with respect to each such asset or investment as Persons generally have and enjoy with respect to their own assets and investment, including power to vote upon any Eligible Investments.

SECTION 8.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Release of Collateral</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; So long as the Issuer is not in default hereunder and no Default hereunder would occur as a result of such action, the Issuer, through the Servicer, may collect, sell or otherwise dispose of written-off receivables, at any time and from time to time in the ordinary course of business, without any notice to, or release or consent by, the Indenture Trustee, but only as and to the extent permitted by the Basic Documents; <u>provided</u>, <u>however</u>, that any and all proceeds of such dispositions shall become Collateral and be deposited to the General Subaccount immediately upon receipt thereof by the Issuer or any other Person, including the Servicer. Without limiting the foregoing, the Servicer, may, at any time and from time to time without any notice to, or release or consent by, the Indenture Trustee, sell or otherwise dispose of any Collateral previously written-off as a defaulted or uncollectible account in accordance with the terms of the Servicing Agreement and the requirements of the proviso in the preceding sentence.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee may, and when required by the provisions of this Indenture shall, execute instruments to release property from the Lien of this Indenture, or convey the Indenture Trustee's interest in the same, in a manner and under circumstances that are not inconsistent with the provisions of this Indenture. No party relying upon an instrument executed by the Indenture Trustee as provided in this <u>Article VIII</u> shall be bound to ascertain the Indenture Trustee's authority, inquire into the satisfaction of any conditions precedent or see to the application of any moneys. The Indenture Trustee shall release property from the Lien of this Indenture pursuant to this <u>Section 8.04(b)</u> only upon receipt of an Issuer Request accompanied by an Officer's Certificate, an Opinion of Counsel of external counsel of the Issuer (at the Issuer's cost and expense) and (if required by the Trust Indenture Act) Independent Certificates in accordance with Section 314(c) of the Trust Indenture Act and Section 314(d)(1) of the Trust Indenture Act meeting the applicable requirements of <u>Section 10.01</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee shall, at such time as there are no Storm Recovery Bonds Outstanding and all sums payable to the Indenture Trustee pursuant to <u>Section 6.07</u> or otherwise have been paid, release any remaining portion of the Storm Recovery Collateral that secured the Storm Recovery Bonds from the Lien of this Indenture and release to the Issuer or any other Person entitled thereto any funds or investments then on deposit in or credited to the Collection Account.

SECTION 8.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Opinion of Counsel</u>. The Indenture Trustee shall receive at least seven days' notice when requested by the Issuer to take any action pursuant to <u>Section 8.04</u>, accompanied by copies of any instruments involved, and the Indenture Trustee shall also require, as a condition to such action, an Opinion of Counsel of external counsel of the Issuer, in form and substance satisfactory to the Indenture Trustee, stating the legal effect of any such action, outlining the steps required to complete the same, and concluding that all conditions precedent to the taking of such action have been complied with and such action will not materially and adversely impair the security for the Storm Recovery Bonds or the rights of the Holders in contravention of the provisions of this Indenture and the Series Supplement; <u>provided</u>, <u>however</u>, that such Opinion of Counsel shall not be required to express an opinion as to the fair value of the Collateral. Counsel rendering any such opinion may rely, without independent investigation, on the accuracy and validity of any certificate or other instrument delivered to the Indenture Trustee in connection with any such action.

SECTION 8.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Reports by Independent Registered Public Accountants</u>. As of the date hereof, the Issuer shall appoint a firm of Independent registered public accountants of recognized national reputation for purposes of preparing and delivering the reports or certificates of such accountants required by this Indenture and the Series Supplement. In the event such firm requires the Indenture Trustee to agree to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree, it being understood and agreed that the Indenture Trustee will deliver such letter of agreement in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee makes no independent inquiry or investigation to, and shall have no obligation or liability in respect of, the sufficiency, validity or correctness of such procedures. Upon any resignation by, or termination by the Issuer of, such firm, the Issuer shall provide written notice thereof to the Indenture Trustee and shall promptly appoint a successor thereto that shall also be a firm of Independent registered public accountants of recognized national reputation. If the Issuer shall fail to appoint a successor to a firm of Independent registered public accountants that has resigned or been terminated within 15 days after such resignation or termination, the Indenture Trustee shall promptly notify the Issuer of such failure in writing. If the Issuer shall not have appointed a successor within ten days thereafter, the Indenture Trustee shall promptly appoint a successor firm of Independent registered public accountants of recognized national reputation; <u>provided</u>, that the Indenture Trustee shall have no liability with respect to such appointment. The fees of such Independent registered public accountants and its successor shall be payable by the Issuer.

ARTICLE IX

SUPPLEMENTAL INDENTURES

SECTION 9.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Supplemental Indentures Without Consent of Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; Without the consent of the Holders of any Storm Recovery Bonds but with prior notice to the Rating Agencies, the Issuer and the Indenture Trustee, when authorized by an Issuer Order, at any time and from time to time, may enter into one or more indentures supplemental hereto (which shall conform to the provisions of the Trust Indenture Act as in force at the date of the execution thereof), in form satisfactory to the Indenture Trustee, for any of the following purposes:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; to correct or amplify the description of any property, including the Collateral, at any time subject to the Lien of this Indenture, or better to assure, convey and confirm unto the Indenture Trustee any property subject or required to be subjected to the Lien of this Indenture, or to subject to the Lien of this Indenture additional property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;to evidence the succession, in compliance with the applicable provisions hereof, of another Person to the Issuer, and the assumption by any such successor of the covenants of the Issuer herein and in the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) to add to the covenants of the Issuer, for the benefit of the Secured Parties, or to surrender any right or power herein conferred upon the Issuer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) to convey, transfer, assign, mortgage or pledge any property to or with the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;to cure any ambiguity, to correct or supplement any provision herein or in any supplemental indenture, including the Series Supplement, that may be inconsistent with any other provision herein or in any supplemental indenture, including the Series Supplement, or to make any other provisions with respect to matters or questions arising under this Indenture or in any supplemental indenture; <u>provided</u>, that (A) such action shall not, as evidenced by an Officer's Certificate, adversely affect in any material respect the interests of the Holders of the Storm Recovery Bonds and (B) the Rating Agency Condition shall have been satisfied with respect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi) to evidence and provide for the acceptance of the appointment hereunder by a successor trustee with respect to the Storm Recovery Bonds and to add to or change any of the provisions of this Indenture as shall be necessary to facilitate the administration of the trusts hereunder by more than one trustee, pursuant to the requirements of <u>Article VI</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) to modify, eliminate or add to the provisions of this Indenture to such extent as shall be necessary to effect the qualification of this Indenture under the Trust Indenture Act and to add to this Indenture such other provisions as may be expressly required by the Trust Indenture Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) to qualify the Storm Recovery Bonds for registration with a Clearing Agency;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;&nbsp;&nbsp;&nbsp;to satisfy any Rating Agency requirements;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;&nbsp;&nbsp; to set forth the terms of a series of Storm Recovery Bonds that has not therefore been authorized; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(xi)&nbsp;&nbsp;&nbsp;&nbsp;to authorize the appointment of any fiduciary for any Tranche required or advisable with the listing of any Tranche on any stock exchange and otherwise amend this Indenture to incorporate changes requested or required by any government authority, stock exchange authority or fiduciary or any Tranche in connection with such listing.

The Indenture Trustee is hereby authorized to join in the execution of any such supplemental indenture and to make any further appropriate agreements and stipulations that may be therein contained.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The Issuer and the Indenture Trustee, when authorized by an Issuer Order, may, also without the consent of any of the Holders of the Storm Recovery Bonds, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Storm Recovery Bonds under this Indenture; <u>provided</u>, <u>however</u>, that (i) such action shall not, as evidenced by an Opinion of Counsel of nationally recognized counsel of the Issuer experienced in structured finance transactions, adversely affect in any material respect the interests of the Holders and (ii) the Rating Agency Condition shall have been satisfied with respect thereto.

SECTION 9.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Supplemental Indentures with Consent of Holders</u>. The Issuer and the Indenture Trustee, when authorized by an Issuer Order, also may, with prior notice to the Rating Agencies and with the consent of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds of each Tranche to be affected, by Act of such Holders delivered to the Issuer and the Indenture Trustee, enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to, or changing in any manner or eliminating any of the provisions of, this Indenture or of modifying in any manner the rights of the Holders of the Storm Recovery Bonds under this Indenture; <u>provided</u>, <u>however</u>, that no such supplemental indenture shall, without the consent of the Holder of each Outstanding Storm Recovery Bond of each Tranche affected thereby:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; change the date of payment of any installment of principal of or premium, if any, or interest on any Storm Recovery Bond of such Tranche, or reduce the principal amount thereof, the interest rate thereon or premium, if any, with respect thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;change the provisions of this Indenture and the Series Supplement relating to the application of collections on, or the proceeds of the sale of, the Collateral to payment of principal of or premium, if any, or interest on the Storm Recovery Bonds of such Tranche, or change any place of payment where, or the coin or currency in which, any Storm Recovery Bond of such Tranche or the interest thereon is payable;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) reduce the percentage of the Outstanding Amount of the Storm Recovery Bonds or of a Tranche thereof, the consent of the Holders of which is required for any such supplemental indenture, or the consent of the Holders of which is required for any waiver of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences provided for in this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;reduce the percentage of the Outstanding Amount of the Storm Recovery Bonds or tranche the Holders of which are required to direct the Indenture Trustee to direct the Issuer to sell or liquidate the Storm Recovery Collateral pursuant to <u>Section 5.04</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v)&nbsp;&nbsp;&nbsp;&nbsp;modify any provision of this <u>Section 9.02</u> or any provision of the other Basic Documents similarly specifying the rights of the Holders to consent to modification thereof, except to increase any percentage specified herein or to provide that those provisions of this Indenture or the other Basic Documents referenced in this <u>Section 9.02</u> cannot be modified or waived without the consent of the Holder of each Outstanding Storm Recovery Bond affected thereby;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vi)&nbsp;&nbsp;&nbsp;&nbsp;modify any of the provisions of this Indenture in such manner as to affect the calculation of the amount of any payment of interest, principal or premium, if any, due on any Storm Recovery Bond on any Payment Date (including the calculation of any of the individual components of such calculation) or change the Expected Sinking Fund Schedule or Final Maturity Date of Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(vii) decrease the Required Capital Level;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(viii) permit the creation of any Lien ranking prior to or on a parity with the Lien of this Indenture with respect to any part of the Collateral or, except as otherwise permitted or contemplated herein, terminate the Lien of this Indenture on any property at any time subject hereto or deprive the Holder of any Storm Recovery Bond of the security provided by the Lien of this Indenture;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ix)&nbsp;&nbsp;&nbsp;&nbsp;cause any material adverse U.S. federal income tax consequence to the Seller, the Issuer, the Managers, the Indenture Trustee or the then-existing Holders; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(x)&nbsp;&nbsp;&nbsp;&nbsp; impair the right to institute suit for the enforcement of the provisions of this Indenture regarding payment or application of funds.

It shall not be necessary for any Act of Holders under this <u>Section 9.02</u> to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

Promptly after the execution by the Issuer and the Indenture Trustee of any supplemental indenture pursuant to this <u>Section 9.02</u>, the Issuer shall furnish or make available electronically to the Rating Agencies a copy of such supplemental indenture and to the Holders of the Storm Recovery Bonds to which such supplemental indenture relates either a copy of such supplemental indenture or a notice setting forth in general terms the substance of such supplemental indenture. Any failure of the Issuer to mail such notice, or any defect therein, shall not, however, in any way impair or affect the validity of any such supplemental indenture.

SECTION 9.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Commission Condition</u>. Notwithstanding anything to the contrary in this <u>Section 9.01</u> or <u>9.02</u>, no supplemental indenture, shall be effective except upon satisfaction of the conditions precedent in this <u>Section 9.03</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; At least 15 days prior to the effectiveness of any such Supplemental Indenture or other action and after obtaining the other necessary approvals set forth in <u>Section 9.02</u> (except that the consent of the Indenture Trustee may be subject to the consent of the Holders if such consent is required or sought by the Indenture Trustee in connection with such Supplemental Indenture) or prior to the effectiveness of any waiver of a default approved by the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds as provided in <u>Section 5.12</u>, the Servicer shall have filed in Commission docket E-7, Sub 1325 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; a reference to Docket No. E-7, Sub 1325;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;an Officer's Certificate stating that the proposed Supplemental Indenture has been approved by all parties to this Indenture or alternatively, the waiver of default has been approved by the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) a statement identifying the person to whom the Commission is to address any response to the proposed Supplemental Indenture or to request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; If the Commission, within 15 days (subject to extension as provided in <u>Section 9.02(c))</u> of receiving a notification complying with <u>Section 9.03(a)</u>, shall have issued an order that the Commission might object to the proposed Supplemental Indenture, or to the waiver of default, then, subject to clause (c) below, such proposed amendment or modification, or the waiver of default, shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed Supplemental Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification or waiver of default, as the case may be, may subsequently become effective upon satisfaction of the other conditions specified in <u>Section 9.01</u> or <u>9.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Following the delivery of an order from the Commission to the Servicer under subparagraph (iii), the Servicer and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed Supplemental Indenture, modification or waiver of default. The fact that the Servicer delivers notice to the Commission pursuant to this <u>Section 9.03</u> does not obligate the Servicer to amend the Indenture as provided in the notice.

SECTION 9.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Effect of Supplemental Indenture</u>. Upon the execution of any supplemental indenture pursuant to the provisions hereof, this Indenture shall be and be deemed to be modified and amended in accordance therewith with respect to each Tranche of Storm Recovery Bonds affected thereby, and the respective rights, limitations of rights, obligations, duties, liabilities and immunities under this Indenture of the Indenture Trustee, the Issuer and the Holders shall thereafter be determined, exercised and enforced hereunder subject in all respects to such modifications and amendments, and all the terms and conditions of any such supplemental indenture shall be and be deemed to be part of the terms and conditions of this Indenture for any and all purposes.

SECTION 9.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Conformity with Trust Indenture Act</u>. Every amendment of this Indenture and every supplemental indenture executed pursuant to this <u>Article IX</u> shall conform to the requirements of the Trust Indenture Act as then in effect so long as this Indenture shall then be qualified under the Trust Indenture Act.

SECTION 9.07.&nbsp;&nbsp;&nbsp;&nbsp; <u>Reference in Storm Recovery Bonds to Supplemental Indentures</u>. Storm Recovery Bonds authenticated and delivered after the execution of any supplemental indenture pursuant to this <u>Article IX</u> may, and if required by the Indenture Trustee shall, bear a notation in form approved by the Indenture Trustee as to any matter provided for in such supplemental indenture. If the Issuer shall so determine, new Storm Recovery Bonds so modified as to conform, in the opinion of the Issuer, to any such supplemental indenture may be prepared and executed by the Issuer and authenticated and delivered by the Indenture Trustee in exchange for Outstanding Storm Recovery Bonds.

ARTICLE X

MISCELLANEOUS

SECTION 10.01.&nbsp;&nbsp;&nbsp;&nbsp; <u>Compliance Certificates and Opinions, etc.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; Upon any application or request by the Issuer to the Indenture Trustee to take any action under any provision of this Indenture, the Issuer shall furnish to the Indenture Trustee (i) an Officer's Certificate stating that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with, (ii) an Opinion of Counsel stating that in the opinion of such counsel the amendment is authorized and permitted and all such conditions precedent, if any, have been complied with and (iii) (if required by the Trust Indenture Act) an Independent Certificate from a firm of registered public accountants meeting the applicable requirements of this <u>Section 10.01</u>, except that, in the case of any such application or request as to which the furnishing of such documents is specifically required by any provision of this Indenture, no additional certificate or opinion need be furnished.

Every certificate or opinion with respect to compliance with a condition or covenant provided for in this Indenture shall include:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i)&nbsp;&nbsp;&nbsp;&nbsp; a statement that each signatory of such certificate or opinion has read or has caused to be read such covenant or condition and the definitions herein relating thereto;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii)&nbsp;&nbsp;&nbsp;&nbsp;a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii)&nbsp;&nbsp;&nbsp;&nbsp;a statement that, in the opinion of each such signatory, such signatory has made such examination or investigation as is necessary to enable such signatory to express an informed opinion as to whether or not such covenant or condition has been complied with; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv)&nbsp;&nbsp;&nbsp;&nbsp;a statement as to whether, in the opinion of each such signatory, such condition or covenant has been complied with.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; Prior to the deposit of any Collateral or other property or securities with the Indenture Trustee that is to be made the basis for the release of any property or securities subject to the Lien of this Indenture, the Issuer shall, in addition to any obligation imposed in <u>Section 10.01(a)</u> or elsewhere in this Indenture, furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such deposit) to the Issuer of the Collateral or other property or securities to be so deposited.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signer thereof as to the matters described in <u>Section 10.01(b)</u>, the Issuer shall also deliver to the Indenture Trustee an Independent Certificate as to the same matters, if the fair value to the Issuer of the securities to be so deposited and of all other such securities made the basis of any such withdrawal or release since the commencement of the then-current fiscal year of the Issuer, as set forth in the certificates delivered pursuant to <u>Section 10.01(b)</u> and this <u>Section 10.01(c)</u>, is ten percent or more of the Outstanding Amount of the Storm Recovery Bonds, but such a certificate need not be furnished with respect to any securities so deposited, if the fair value thereof to the Issuer as set forth in the related Officer's Certificate is less than the lesser of (A) $25,000 or (B) one percent of the Outstanding Amount of the Storm Recovery Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Whenever any property or securities are to be released from the Lien of this Indenture other than pursuant to <u>Section 8.02(e)</u>, the Issuer shall also furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of each person signing such certificate as to the fair value (within 90 days of such release) of the property or securities proposed to be released and stating that in the opinion of such person the proposed release will not impair the security under this Indenture in contravention of the provisions hereof.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; Whenever the Issuer is required to furnish to the Indenture Trustee an Officer's Certificate certifying or stating the opinion of any signatory thereof as to the matters described in <u>Section 10.01(d)</u>, the Issuer shall also furnish to the Indenture Trustee an Independent Certificate as to the same matters if the fair value of the property or securities with respect thereto, or securities released from the Lien of this Indenture (other than pursuant to <u>Section 8.02(e)</u>) since the commencement of the then-current calendar year, as set forth in the certificates required by <u>Section 10.01(d)</u> and this <u>Section 10.01(e)</u>, equals 10 percent or more of the Outstanding Amount of the Storm Recovery Bonds, but such certificate need not be furnished in the case of any release of property or securities if the fair value thereof as set forth in the related Officer's Certificate is less than the lesser of (A) $25,000 or (B) one percent of the then Outstanding Amount of the Storm Recovery Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; Notwithstanding any other provision of this <u>Section 10.01</u>, the Indenture Trustee may (A) collect, liquidate, sell or otherwise dispose of the Storm Recovery Property and the other Collateral as and to the extent permitted or required by the Basic Documents and (B) make cash payments out of the Collection Account as and to the extent permitted or required by the Basic Documents.

SECTION 10.02.&nbsp;&nbsp;&nbsp;&nbsp; <u>Form of Documents Delivered to Indenture Trustee</u>. In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate or opinion of a Responsible Officer of the Issuer may be based, insofar as it relates to legal matters, upon a certificate or opinion of, or representations by, counsel, unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his or her certificate or opinion is based are erroneous. Any such certificate of a Responsible Officer or Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or representations by, an officer or officers of the Servicer or the Issuer stating that the information with respect to such factual matters is in the possession of the Servicer or the Issuer, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are erroneous.

Whenever in this Indenture, in connection with any application or certificate or report to the Indenture Trustee, it is provided that the Issuer shall deliver any document as a condition of the granting of such application, or as evidence of the Issuer's compliance with any term hereof, it is intended that the truth and accuracy, at the time of the granting of such application or at the effective date of such certificate or report (as the case may be), of the facts and opinions stated in such document shall in such case be conditions precedent to the right of the Issuer to have such application granted or to the sufficiency of such certificate or report. The foregoing shall not, however, be construed to affect the Indenture Trustee's right to rely conclusively upon the truth and accuracy of any statement or opinion contained in any such document as provided in <u>Article VI</u>.

Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

SECTION 10.03.&nbsp;&nbsp;&nbsp;&nbsp; <u>Acts of Holders</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by agents duly appointed in writing, and except as herein otherwise expressly provided such action shall become effective when such instrument or instruments are delivered to the Indenture Trustee and, where it is hereby expressly required, to the Issuer. Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the "<u>Act</u>" of the Holders signing such instrument or instruments. Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to <u>Section 6.01</u>) conclusive in favor of the Indenture Trustee and the Issuer, if made in the manner provided in this <u>Section 10.03</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The fact and date of the execution by any Person of any such instrument or writing may be proved in any manner that the Indenture Trustee deems sufficient.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; The ownership of Storm Recovery Bonds shall be proved by the Storm Recovery Bond Register.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; Any request, demand, authorization, direction, notice, consent, waiver or other action by the Holder of any Storm Recovery Bonds shall bind the Holder of every Storm Recovery Bond issued upon the registration thereof or in exchange therefor or in lieu thereof, in respect of anything done, omitted or suffered to be done by the Indenture Trustee or the Issuer in reliance thereon, whether or not notation of such action is made upon such Storm Recovery Bond.

SECTION 10.04.&nbsp;&nbsp;&nbsp;&nbsp; <u>Notices, etc., to Indenture Trustee, Issuer and Rating Agencies</u>. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; in the case of the Issuer, to Duke Energy Carolinas NC Storm Funding II LLC at 525 South Tryon Street Charlotte, North Carolina 28202, Attention: Manager, Telephone: 800-488-3853 in case of (c/o): Treasurer and at 525 South Tryon Street, Charlotte, North Carolina 28202, Attention: Structured Finance Director, Telephone: 800-488-2264;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; in the case of the Indenture Trustee, to the Corporate Trust Office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; In the case of Moody's, to Moody's Investor Services, Inc., ABS/RMBS Monitoring Department, 24th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York, Email: <u>servicerreports@moodys.com</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; in the case of S&P, to S&P Global Ratings, a division of S&P Global Inc., Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to S&P in writing by email); and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; in the case of the Commission and the Public Staff – North Carolina Utilities Commission, by filing a notice in docket E-7, Sub 1325 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff.

Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

The Indenture Trustee agrees to accept and act upon instructions or directions pursuant to this Indenture sent by the Issuer by unsecured e-mail, facsimile transmission or other similar unsecured electronic methods; provided, however, that (a) subsequent to such transmission of written instructions, the Issuer shall provide the originally executed instructions or directions to the Indenture Trustee in a timely manner, and (b) such originally executed instructions or directions shall be signed by an authorized representative of the Issuer providing such instructions or directions. If the Issuer elects to give the Indenture Trustee e-mail or facsimile instructions (or instructions by a similar electronic method) and the Indenture Trustee in its discretion elects to act upon such instructions, the Indenture Trustee's understanding of such instructions shall be deemed controlling. The Indenture Trustee shall not be liable for any losses, costs or expenses arising directly or indirectly from the Indenture Trustee's reliance upon and compliance with such instructions notwithstanding such instructions conflict or are inconsistent with a subsequent written instruction. The Issuer agrees to assume all risks arising out of the use of such electronic methods to submit instructions and directions to the Indenture Trustee, including without limitation the risk of the Indenture Trustee acting on unauthorized instructions, and the risk or interception and misuse by third parties.

SECTION 10.05.&nbsp;&nbsp;&nbsp;&nbsp; <u>Notices to Holders; Waiver</u>. Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if in writing and mailed, first-class, postage prepaid to each Holder affected by such event, at such Holder's address as it appears on the Storm Recovery Bond Register, not later than the latest date, and not earlier than the earliest date, prescribed for the giving of such notice. In any case where notice to Holders is given by mail, neither the failure to mail such notice nor any defect in any notice so mailed to any particular Holder shall affect the sufficiency of such notice with respect to other Holders, and any notice that is mailed in the manner herein provided shall conclusively be presumed to have been duly given.

Where this Indenture provides for notice in any manner, such notice may be waived in writing by any Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice. Waivers of notice by Holders shall be filed with the Indenture Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such a waiver.

In case, by reason of the suspension of regular mail service as a result of a strike, work stoppage or similar activity, it shall be impractical to mail notice of any event of Holders when such notice is required to be given pursuant to any provision of this Indenture, then any manner of giving such notice as shall be satisfactory to the Indenture Trustee shall be deemed to be a sufficient giving of such notice.

Where this Indenture provides for notice to the Rating Agencies, failure to give such notice shall not affect any other rights or obligations created hereunder and shall not under any circumstance constitute a Default or Event of Default.

SECTION 10.06.&nbsp;&nbsp;&nbsp;&nbsp; <u>Conflict with Trust Indenture Act</u>. If any provision hereof limits, qualifies or conflicts with another provision hereof that is required to be included in this Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control.

The provisions of Sections 310 through 317 of the Trust Indenture Act that impose duties on any Person (including the provisions automatically deemed included herein unless expressly excluded by this Indenture) are a part of and govern this Indenture, whether or not physically contained herein.

SECTION 10.07.&nbsp;&nbsp;&nbsp;&nbsp; <u>Successors and Assigns</u>. All covenants and agreements in this Indenture and the Storm Recovery Bonds by the Issuer shall bind its successors and assigns, whether so expressed or not. All agreements of the Indenture Trustee in this Indenture shall bind its successors.

SECTION 10.08.&nbsp;&nbsp;&nbsp;&nbsp; <u>Severability</u>. Any provision in this Indenture or in the Storm Recovery Bonds that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 10.09.&nbsp;&nbsp;&nbsp;&nbsp; <u>Benefits of Indenture</u>. Nothing in this Indenture or in the Storm Recovery Bonds, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder, and the Holders, and any other party secured hereunder, and any other Person with an ownership interest in any part of the Collateral, any benefit or any legal or equitable right, remedy or claim under this Indenture.

SECTION 10.10.&nbsp;&nbsp;&nbsp;&nbsp; <u>Legal Holidays</u>. In any case where the date on which any payment is due shall not be a Business Day, then (notwithstanding any other provision of the Storm Recovery Bonds or this Indenture) payment need not be made on such date, but may be made on the next Business Day with the same force and effect as if made on the date on which nominally due, and no interest shall accrue for the period from and after any such nominal date.

SECTION 10.11.&nbsp;&nbsp;&nbsp;&nbsp; <u>GOVERNING LAW</u>. **This Indenture shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; <u>provided</u>, that the creation, attachment and perfection of any Liens created hereunder in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.**

SECTION 10.12.&nbsp;&nbsp;&nbsp;&nbsp; <u>Counterparts</u>. This Indenture may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all such counterparts shall together constitute but one and the same instrument. The Issuer and Indenture Trustee agree that this Indenture may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by DocuSign or any other digital signature provider as specified in writing to the Indenture Trustee) appearing on this Indenture are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Indenture may be made by facsimile, email or other electronic transmission. The Issuer agrees to assume all risks arising out of the use of digital signatures and electronic methods of submitting such signatures to the Indenture Trustee, including without limitation the risk of the Indenture Trustee acting upon documents with unauthorized signatures and the risk of interception and misuse by third parties.

SECTION 10.13.&nbsp;&nbsp;&nbsp;&nbsp; <u>Recording of Indenture</u>. If this Indenture is subject to recording in any appropriate public recording offices, such recording is to be effected by the Issuer and at its expense accompanied by an Opinion of Counsel at the Issuer's cost and expense (which may be counsel to the Indenture Trustee or any other counsel reasonably acceptable to the Indenture Trustee or, if requested by the Indenture Trustee, external counsel of the Issuer) to the effect that such recording is necessary either for the protection of the Holders or any other Person secured hereunder or for the enforcement of any right or remedy granted to the Indenture Trustee under this Indenture.

SECTION 10.14.&nbsp;&nbsp;&nbsp;&nbsp; <u>No Recourse to Issuer</u>. No recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Storm Recovery Bonds or under this Indenture or any certificate or other writing delivered in connection herewith or therewith, against (a) the Issuer, other than from the Storm Recovery Collateral, (b) any owner of a membership interest in the Issuer (including Duke Energy Carolinas) or (c) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Carolinas) in its respective individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed in writing. Notwithstanding any provision of this Indenture or the Series Supplement to the contrary, Holders shall look only to the Storm Recovery Collateral with respect to any amounts due to the Holders hereunder and under the Storm Recovery Bonds and, in the event such Storm Recovery Collateral is insufficient to pay in full the amounts owed on the Storm Recovery Bonds, shall have no recourse against the Issuer in respect of such insufficiency. Each Holder by accepting a Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Storm Recovery Bonds.

SECTION 10.15.&nbsp;&nbsp;&nbsp;&nbsp; <u>Basic Documents</u>. The Indenture Trustee is hereby authorized and directed to execute and deliver the Servicing Agreement and the Sale Agreement and to execute and deliver any other Basic Document that it is requested to acknowledge, and accept, including, upon receipt of an Issuer Request, the joinder or amendment to the Intercreditor Agreements. Such request shall be accompanied by an Opinion of Counsel of external counsel of the Issuer, upon which the Indenture Trustee may rely conclusively with no duty of independent investigation or inquiry, to the effect that all conditions precedent for the execution of the Intercreditor Agreements have been satisfied. The Intercreditor Agreements shall be binding on the Holders and all Holders are deemed to have consented to the provisions of this <u>Section 10.15</u>.

SECTION 10.16.&nbsp;&nbsp;&nbsp;&nbsp; <u>No Petition</u>. The Indenture Trustee, by entering into this Indenture, and each Holder, by accepting a Storm Recovery Bond (or interest therein) issued hereunder, hereby covenant and agree that they shall not, prior to the date that is one year and one day after the termination of this Indenture, acquiesce, petition or otherwise invoke or cause the Issuer or any Manager to invoke the process of any court or government authority for the purpose of commencing or sustaining a case against the Issuer under any bankruptcy or insolvency law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property, or ordering the dissolution, winding up or liquidation of the affairs of the Issuer. Nothing in this <u>Section 10.16</u> shall preclude, or be deemed to estop, such Holder or the Indenture Trustee (a) from taking or omitting to take any action prior to such date in (i) any case or proceeding voluntarily filed or commenced by or on behalf of the Issuer under or pursuant to any such law or (ii) any involuntary case or proceeding pertaining to the Issuer that is filed or commenced by or on behalf of a Person other than such Holder and is not joined in by such Holder (or any Person to which such Holder shall have assigned, transferred or otherwise conveyed any part of the obligations of the Issuer hereunder) under or pursuant to any such law or (b) from commencing or prosecuting any legal action that is not an involuntary case or proceeding under or pursuant to any such law against the Issuer or any of its properties.

SECTION 10.17.&nbsp;&nbsp;&nbsp;&nbsp; <u>Securities Intermediary and Account Bank</u>. Each of the Securities Intermediary and the Account Bank, in acting under this Indenture, is entitled to all rights, benefits, protections, immunities and indemnities accorded to U.S. Bank Trust Company, National Association, in its capacity as Indenture Trustee under this Indenture.

SECTION 10.18.&nbsp;&nbsp;&nbsp;&nbsp; <u>Rule 17g-5 Compliance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Indenture Trustee to any Rating Agency under this Indenture or any other Basic Document to which it is a party for the purpose of determining or confirming the credit rating of the Storm Recovery Bonds or undertaking credit rating surveillance of the Storm Recovery Bonds shall be provided, substantially concurrently, to the Servicer for posting on a password-protected website (the "<u>17g-5 Website</u>"). The Servicer shall be responsible for posting all of the information on the 17g-5 Website.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; The Indenture Trustee will not be responsible for creating or maintaining the 17g-5 Website, posting any information to the 17g-5 Website or assuring that the 17g-5 Website complies with the requirements of this Indenture, Rule 17g-5 under the Exchange Act or any other law or regulation. In no event shall the Indenture Trustee be deemed to make any representation in respect of the content of the 17g-5 Website or compliance by the 17g-5 Website with this Indenture, Rule 17g-5 under the Exchange Act or any other law or regulation. The Indenture Trustee shall have no obligation to engage in or respond to any oral communications with respect to the transactions contemplated hereby, any transaction documents relating hereto or in any way relating to the Storm Recovery Bonds or for the purposes of determining the initial credit rating of the Storm Recovery Bonds or undertaking credit rating surveillance of the Storm Recovery Bonds with any Rating Agency or any of its respective officers, directors or employees. The Indenture Trustee shall not be responsible or liable for the dissemination of any identification numbers or passwords for the 17g-5 Website, including by the Servicer, the Rating Agencies, a nationally recognized statistical rating organization ("<u>NRSRO</u>"), any of their respective agents or any other party. Additionally, the Indenture Trustee shall not be liable for the use of the information posted on the 17g-5 Website, whether by the Servicer, the Rating Agencies, an NRSRO or any other third party that may gain access to the 17g-5 Website or the information posted thereon.

SECTION 10.19.&nbsp;&nbsp;&nbsp;&nbsp; <u>Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial</u>. **Each of the Issuer and the Indenture Trustee and each Holder (by its acceptance of the Storm Recovery Bonds) hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Indenture and the Storm Recovery Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.**

SECTION 10.20.&nbsp;&nbsp;&nbsp;&nbsp; <u>Certain Tax Laws</u>. In order to comply with applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) in effect from time to time to which a foreign financial institution, issuer, trustee, paying agent, holder or other institution is or has agreed to be subject related to the Basic Documents, the Issuer agrees (a) to provide to the Indenture Trustee sufficient information about Holders or other applicable parties and/or transactions (including any modification to the terms of such transactions) so as to enable the Indenture Trustee to determine whether it has tax-related obligations under such applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) and (b) that the Indenture Trustee shall be entitled to make any withholding or deduction from payments under the Basic Documents to the extent necessary to comply with such applicable tax laws, rules and regulations (inclusive of directives, guidelines and interpretations promulgated by competent authorities) for which the Indenture Trustee shall not have any liability.

{SIGNATURE PAGE FOLLOWS}

IN WITNESS WHEREOF, the Issuer, the Indenture Trustee, the Securities Intermediary and the Account Bank have caused this Indenture to be duly executed by their respective officers thereunto duly authorized and duly attested, all as of the day and year first above written.

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| | |
|:---|:---|
| DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br>as Issuer | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br>as Issuer |
| By: |  |
|  | Name: |
|  | Title: |
| U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br>as Indenture Trustee | U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br>as Indenture Trustee |
| By: |  |
|  | Name: |
|  | Title: |
| U.S. BANK NATIONAL ASSOCIATION,<br>as Securities Intermediary and Account Bank | U.S. BANK NATIONAL ASSOCIATION,<br>as Securities Intermediary and Account Bank |
| By: |  |
|  | Name: |
|  | Title: |

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*Signature Page to<br> Indenture*

<u>EXHIBIT A</u>

FORM OF STORM RECOVERY BOND

See attached.

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN DEFINITIVE REGISTERED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO THE NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION, TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON OR ENTITY IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

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| | |
|:---|:---|
| No. {_____} | ${__________} |
| Tranche Designation {__} | CUSIP No.: {__________} |

---

THE PRINCIPAL OF THIS SERIES {__}, TRANCHE {__} SENIOR SECURED STORM RECOVERY BOND, (THIS "<u>STORM RECOVERY BOND</u>") WILL BE PAID IN INSTALLMENTS AS SET FORTH HEREIN. ACCORDINGLY, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS STORM RECOVERY BOND AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ABOVE. THE HOLDER OF THIS STORM RECOVERY BOND HAS NO RECOURSE TO THE ISSUER HEREOF AND AGREES TO LOOK ONLY TO THE STORM RECOVERY COLLATERAL, AS DESCRIBED IN THE INDENTURE, FOR PAYMENT OF ANY AMOUNTS DUE HEREUNDER. ALL OBLIGATIONS OF THE ISSUER OF THIS STORM RECOVERY BOND UNDER THE TERMS OF THE INDENTURE WILL BE RELEASED AND DISCHARGED UPON PAYMENT IN FULL HEREOF OR AS OTHERWISE PROVIDED IN <u>SECTION 3.10(b)</u> OR <u>ARTICLE IV</u> OF THE INDENTURE. THE HOLDER OF THIS STORM RECOVERY BOND HEREBY COVENANTS AND AGREES THAT PRIOR TO THE DATE THAT IS ONE YEAR AND ONE DAY AFTER THE PAYMENT IN FULL OF THIS STORM RECOVERY BOND, IT WILL NOT INSTITUTE AGAINST, OR JOIN ANY OTHER PERSON IN INSTITUTING AGAINST, THE ISSUER ANY BANKRUPTCY, REORGANIZATION, ARRANGEMENT, INSOLVENCY OR LIQUIDATION PROCEEDINGS OR OTHER SIMILAR PROCEEDING UNDER THE LAWS OF THE UNITED STATES OR ANY STATE OF THE UNITED STATES. NOTHING IN THIS PARAGRAPH SHALL PRECLUDE, OR BE DEEMED TO ESTOP, SUCH HOLDER (A) FROM TAKING OR OMITTING TO TAKE ANY ACTION PRIOR TO SUCH DATE IN (I) ANY CASE OR PROCEEDING VOLUNTARILY FILED OR COMMENCED BY OR ON BEHALF OF THE ISSUER UNDER OR PURSUANT TO ANY SUCH LAW OR (II) ANY INVOLUNTARY CASE OR PROCEEDING PERTAINING TO THE ISSUER THAT IS FILED OR COMMENCED BY OR ON BEHALF OF A PERSON OTHER THAN SUCH HOLDER AND IS NOT JOINED IN BY SUCH HOLDER (OR ANY PERSON TO WHICH SUCH HOLDER SHALL HAVE ASSIGNED, TRANSFERRED OR OTHERWISE CONVEYED ANY PART OF THE OBLIGATIONS OF THE ISSUER HEREUNDER) UNDER OR PURSUANT TO ANY SUCH LAW OR (B) FROM COMMENCING OR PROSECUTING ANY LEGAL ACTION THAT IS NOT AN INVOLUNTARY CASE OR PROCEEDING UNDER OR PURSUANT TO ANY SUCH LAW AGAINST THE ISSUER OR ANY OF ITS PROPERTIES.

NEITHER THE FULL FAITH AND CREDIT NOR THE TAXING POWER OF THE STATE OF NORTH CAROLINA IS PLEDGED TO THE PAYMENT OF THE PRINCIPAL OF, OR INTEREST ON, THIS STORM RECOVERY BOND.

DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC<br>SERIES {__} SENIOR SECURED STORM RECOVERY BONDS, TRANCHE {__}

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| | | | |
|:---|:---|:---|:---|
| <br> BOND <br> INTEREST<br>RATE | <br> ORIGINAL <br> PRINCIPAL<br>AMOUNT | SCHEDULED<br>FINAL<br> PAYMENT<br> DATE | <br> FINAL <br> MATURITY<br>DATE |
| {____}% | ${__________} | {__________}, 20{__} | {__________}, 20{__} |

---

Duke Energy Carolinas NC Storm Funding II LLC, a limited liability company created under the laws of the State of Delaware (herein referred to as the "<u>Issuer</u>"), for value received, hereby promises to pay to {__________}, or registered assigns, the Original Principal Amount shown above in semi-annual installments on the Payment Dates and in the amounts specified below or, if less, the amounts determined pursuant to <u>Section 8.02</u> of the Indenture, in each year, commencing on the date determined as provided below and ending on or before the Final Maturity Date shown above and to pay interest, at the Bond Interest Rate shown above, on each {__________} and {__________} or, if any such day is not a Business Day, the next Business Day, commencing on {__________}, 20{__} and continuing until the earlier of the payment in full of the principal hereof and the Final Maturity Date (each, a "<u>Payment Date</u>"), on the principal amount of this Storm Recovery Bond. Interest on this Storm Recovery Bond will accrue for each Payment Date from the most recent Payment Date on which interest has been paid to but excluding such Payment Date or, if no interest has yet been paid, from the date of issuance. Interest will be computed on the basis of {__________}. Such principal of and interest on this Storm Recovery Bond shall be paid in the manner specified below.

The principal of and interest on this Storm Recovery Bond are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts. All payments made by the Issuer with respect to this Storm Recovery Bond shall be applied first to interest due and payable on this Storm Recovery Bond as provided above and then to the unpaid principal of and premium, if any, on this Storm Recovery Bond, all in the manner set forth in the Indenture.

Unless the certificate of authentication hereon has been executed by the Indenture Trustee whose name appears below by manual or electronic signature, this Storm Recovery Bond shall not be entitled to any benefit under the Indenture referred to below or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually, electronically or in facsimile, by its Responsible Officer.

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| | | |
|:---|:---|:---|
| Date: {__________}, 20{__} | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br>as Issuer | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br>as Issuer |
|  | By: |  |
|  |  | Name: |
|  |  | Title: |

---

INDENTURE TRUSTEE'S <br>CERTIFICATE OF AUTHENTICATION

Dated: {__________}, 20{__}

This is one of the Series {__}, Tranche {__} Senior Secured Storm Recovery Bonds, designated above and referred to in the within-mentioned Indenture.

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| | |
|:---|:---|
| U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br>as Indenture Trustee | U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br>as Indenture Trustee |
| By: |  |
|  | Name: |
|  | Title: |

---

This Senior Secured Storm Recovery Bond, Series {__}, Tranche {__} is one of a duly authorized issue of Series {__} Senior Secured Storm Recovery Bonds of the Issuer (herein called the "<u>Series {__} Bonds</u>"), which Bonds are issuable in one or more Tranches. The Series {__} Bonds consist of {__} Tranches, including the Tranche {__} Series {__} Senior Secured Storm Recovery Bonds, which include this Senior Secured Storm Recovery Bond (herein called the "<u>Tranche {__} Storm Recovery Bonds</u>"), all issued and to be issued under that certain Indenture dated as of [ ], 202[ ] (as supplemented by the Series Supplement (as defined below), the "<u>Indenture</u>"), between the Issuer and U.S. Bank Trust Company, National Association, in its capacity as indenture trustee (the "<u>Indenture Trustee</u>", which term includes any successor indenture trustee under the Indenture) and U.S. Bank National Association, in its capacity as a securities intermediary (the "<u>Securities Intermediary</u>", which term includes any successor securities intermediary under the Indenture) and as an account bank (the "<u>Account Bank</u>"), to which Indenture and all indentures supplemental thereto reference is hereby made for a statement of the respective rights and obligations thereunder of the Issuer, the Indenture Trustee and the Holders of the Bonds. For purposes herein, "<u>Series Supplement</u>" means that certain Series Supplement dated as of {&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;, 20 } between the Issuer and the Indenture Trustee. All terms used in this Tranche {__} Storm Recovery Bond that are defined in the Indenture, as amended, restated, supplemented or otherwise modified from time to time, shall have the meanings assigned to such terms in the Indenture.

All Tranches of Series {__} Bonds are and will be equally and ratably secured by the Storm Recovery Collateral pledged as security therefor as provided in the Indenture.

The principal of this Tranche {__} Storm Recovery Bond shall be payable on each Payment Date only to the extent that amounts in the Collection Account for the Series {__} Bonds are available therefor, and only until the outstanding principal balance thereof on the preceding Payment Date (after giving effect to all payments of principal, if any, made on the preceding Payment Date) has been reduced to the principal balance specified in the Expected Sinking Fund Schedule that is attached to the Series Supplement as <u>Schedule A</u>, unless payable earlier because an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders representing a majority of the Outstanding Amount of the Bonds have declared the Series {__} Bonds to be immediately due and payable in accordance with <u>Section 5.02</u> of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with <u>Section 5.02</u> of the Indenture). However, actual principal payments may be made in lesser than expected amounts and at later than expected times as determined pursuant to <u>Section 8.02</u> of the Indenture. The entire unpaid principal amount of this Tranche {__} Storm Recovery Bond shall be due and payable on the Final Maturity Date hereof. Notwithstanding the foregoing, the entire unpaid principal amount of the Bonds shall be due and payable, if not then previously paid, on the date on which an Event of Default shall have occurred and be continuing and the Indenture Trustee or the Holders of the Bonds representing a majority of the Outstanding Amount of the Bonds have declared the Storm Recovery Bonds to be immediately due and payable in the manner provided in <u>Section 5.02</u> of the Indenture (unless such declaration shall have been rescinded and annulled in accordance with <u>Section 5.02</u> of the Indenture). All principal payments on the Tranche {__} Storm Recovery Bonds shall be made pro rata to the Holders of the Tranche{__} Storm Recovery Bonds entitled thereto based on the respective principal amounts of the Tranche {__} Storm Recovery Bonds held by them.

Payments of interest on this Tranche {__} Storm Recovery Bond due and payable on each Payment Date, together with the installment of principal or premium, if any, shall be made by check mailed first-class, postage prepaid, to the Person whose name appears as the Registered Holder of this Tranche {__} Storm Recovery Bond (or one or more Predecessor Storm Recovery Bonds) on the Storm Recovery Bond Register as of the close of business on the Record Date or in such other manner as may be provided in the Indenture or the Series Supplement, except that (a) upon application to the Indenture Trustee by any Holder owning a Global Storm Recovery Bond evidencing this Tranche {__} Storm Recovery Bond not later than the applicable Record Date, payment will be made by wire transfer to an account maintained by such Holder, and (b) if this Tranche {__} Storm Recovery Bond is held in Book-Entry Form, payments will be made by wire transfer in immediately available funds to the account designated by the Holder of the applicable Global Storm Recovery Bond evidencing this Tranche {__} Storm Recovery Bond unless and until such Global Storm Recovery Bond is exchanged for Definitive Storm Recovery Bonds (in which event payments shall be made as provided above) and except for the final installment of principal and premium, if any, payable with respect to this Tranche {__} Storm Recovery Bond on a Payment Date, which shall be payable as provided below. Such checks shall be mailed to the Person entitled thereto at the address of such Person as it appears on the Storm Recovery Bond Register as of the applicable Record Date without requiring that this Tranche {__} Storm Recovery Bond be submitted for notation of payment. Any reduction in the principal amount of this Tranche {__} Storm Recovery Bond (or any one or more Predecessor Storm Recovery Bonds) effected by any payments made on any Payment Date shall be binding upon all future Holders of this Tranche {__} Storm Recovery Bond and of any Storm Recovery Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. If funds are expected to be available, as provided in the Indenture, for payment in full of the then-remaining unpaid principal amount of this Tranche {__} Storm Recovery Bond on a Payment Date, then the Indenture Trustee, in the name of and on behalf of the Issuer, will notify the Person who was the Registered Holder hereof as of the Record Date preceding such Payment Date by notice sent no later than five days prior to such final Payment Date and shall specify that such final installment will be payable only upon presentation and surrender of this Tranche {__} Storm Recovery Bond and shall specify the place where this Tranche {__} Storm Recovery Bond may be presented and surrendered for payment of such installment.

The Issuer shall pay interest on overdue installments of interest at the Bond Interest Rate to the extent lawful.

This Tranche {__} Storm Recovery Bond is a "storm recovery bond" as such term is defined in the Storm Recovery Law. Principal and interest due and payable on this Tranche {__} Storm Recovery Bond are payable from and secured primarily by Storm Recovery Property created and established by the Financing Order obtained from the North Carolina Utilities Commission pursuant to the Storm Recovery Law. Storm Recovery Property consists of the rights and interests of the Seller in the Financing Order, including the right to impose, bill, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising out of the rights and interests created under the Financing Order.

Under the laws of the State of North Carolina in effect on the date hereof, pursuant to N.C. Gen. Stat. § 62-172(k), the State of North Carolina has pledged to agree and work with the Holders, the Indenture Trustee, other Financing Parties that the State of North Carolina will not (a) alter the provisions of N.C. Gen. Stat. § 62-172(k) which make the Storm Recovery Charges imposed by the Financing Order or Subsequent Financing Order irrevocable, binding, and nonbypassable charges; (b) take or permit any action that impairs or would impair the value of Storm Recovery Property or revises the Storm Recovery Costs for which recovery is authorized; (c) in any way impair the rights and remedies of the bondholders, assignees and other Financing Parties; (d) or except as authorized under the Storm Recovery Law, reduce, alter, or impair Charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, the Indenture Trustee and any other Financing Parties until any and all principal, interest, premium, financing costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related Storm Recovery Bonds have been paid and performed in full.

The Issuer and Duke Energy Carolinas/ hereby acknowledge that the purchase of this Storm Recovery Bond by the Holder hereof or the purchase of any beneficial interest herein by any Person are made in reliance on the foregoing pledge.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Tranche {__} Storm Recovery Bond may be registered on the Storm Recovery Bond Register upon surrender of this Tranche {__} Storm Recovery Bond for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by, (a) a written instrument of transfer in form satisfactory to the Indenture Trustee duly executed by the Holder hereof or such Holder's attorney duly authorized in writing, with such signature guaranteed by: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) The Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee, and (b) such other documents as the Indenture Trustee may require, and thereupon one or more new Storm Recovery Bonds of Authorized Denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Tranche {__} Storm Recovery Bond, but the transferor may be required to pay a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange, other than exchanges pursuant to <u>Section 2.04</u> or <u>Section 2.06</u> of the Indenture not involving any transfer.

Each Holder, by acceptance of a Tranche {__} Storm Recovery Bond, covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Tranche {__} Storm Recovery Bonds or under the Indenture or any certificate or other writing delivered in connection therewith, against (a) any owner of a membership interest in the Issuer (including Duke Energy Carolinas) or (b) any shareholder, partner, owner, beneficiary, agent, officer or employee of the Indenture Trustee, the Managers or any owner of a membership interest in the Issuer (including Duke Energy Carolinas) in its respective individual or corporate capacities, or of any successor or assign of any of them in their individual or corporate capacities, except as any such Person may have expressly agreed in writing. Each Holder by accepting a Tranche {__} Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Tranche {__} Storm Recovery Bonds.

Prior to the due presentment for registration of transfer of this Tranche {__} Storm Recovery Bond, the Issuer, the Indenture Trustee and any agent of the Issuer or the Indenture Trustee may treat the Person in whose name this Tranche {__} Storm Recovery Bond is registered (as of the day of determination) as the owner hereof for the purpose of receiving payments of principal of and premium, if any, and interest on this Tranche {__} Storm Recovery Bond and for all other purposes whatsoever, whether or not this Tranche {__} Storm Recovery Bond be overdue, and none of the Issuer, the Indenture Trustee or any such agent shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Storm Recovery Bonds under the Indenture at any time by the Issuer with the consent of the Holders representing a majority of the Outstanding Amount of all Storm Recovery Bonds at the time outstanding of each Tranche to be affected and upon the satisfaction of the Rating Agency Condition and Commission Condition, if necessary. The Indenture also contains provisions permitting the Holders representing specified percentages of the Outstanding Amount of the Storm Recovery Bonds, on behalf of the Holders of all the Storm Recovery Bonds, with the consent of the Commission, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver by the Holder of this Tranche {__} Storm Recovery Bond (or any one of more Predecessor Storm Recovery Bonds) shall be conclusive and binding upon such Holder and upon all future Holders of this Tranche {__} Storm Recovery Bond and of any Tranche {__} Storm Recovery Bond issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Tranche {__} Storm Recovery Bond. The Indenture also permits the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of the Storm Recovery Bonds issued thereunder, but with the satisfaction of the Commission Condition, if necessary.

The Indenture contains provisions for defeasance at any time of (a) the entire indebtedness of the Issuer on a Storm Recovery Bond and (b) certain restrictive covenants and the related Events of Default, upon compliance by the Issuer with certain conditions set forth in the Indenture, which provisions apply to this Tranche {__} Storm Recovery Bond.

The term "Issuer" as used in this Tranche {__} Storm Recovery Bond includes any successor to the Issuer under the Indenture.

The Issuer is permitted by the Indenture, under certain circumstances, to merge or consolidate, subject to the rights of the Indenture Trustee and the Holders under the Indenture.

The Tranche {__} Storm Recovery Bonds are issuable only in registered form in denominations as provided in the Indenture and the Series Supplement subject to certain limitations therein set forth.

**This Tranche {__} Storm Recovery Bond, the Indenture and the Series Supplement shall be construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder and thereunder shall be determined in accordance with such laws; <u>provided</u>, that the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.**

No reference herein to the Indenture and no provision of this Tranche {__} Storm Recovery Bond or of the Indenture shall alter or impair the obligation, which is absolute and unconditional, to pay the principal of and interest on this Tranche {__} Storm Recovery Bond at the times, place and rate and in the coin or currency herein prescribed.

The Issuer and the Indenture Trustee, by entering into the Indenture, and the Holders and any Persons holding a beneficial interest in any Tranche {__} Storm Recovery Bond, by acquiring any Tranche {__} Storm Recovery Bond or interest therein, (a) express their intention that, solely for the purpose of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for the purpose of state, local and other taxes, the Tranche {__} Storm Recovery Bonds qualify under applicable tax law as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral and (b) solely for purposes of U.S. federal taxes and, to the extent consistent with applicable state, local and other tax law, solely for purposes of state, local and other taxes, so long as any of the Tranche {__} Storm Recovery Bonds are outstanding, agree to treat the Tranche {__} Storm Recovery Bonds as indebtedness of the sole owner of the Issuer secured by the Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.

ABBREVIATIONS

The following abbreviations, when used above on this Storm Recovery Bond, shall be construed as though they were written out in full according to applicable laws or regulations.

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| | | | |
|:---|:---|:---|:---|
| TEN COM | as tenants in common | as tenants in common | as tenants in common |
| TEN ENT | as tenants by the entireties | as tenants by the entireties | as tenants by the entireties |
| JT TEN | as joint tenants with right of survivorship and not as tenants in common | as joint tenants with right of survivorship and not as tenants in common | as joint tenants with right of survivorship and not as tenants in common |
| UNIF GIFT MIN ACT | | Custodian | |
|  | (Custodian) |  | (minor) |
|  | Under Uniform Gifts to Minor Act (____________________) | Under Uniform Gifts to Minor Act (____________________) | Under Uniform Gifts to Minor Act (____________________) |
|  |  |  | (State) |

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Additional abbreviations may also be used though not in the above list.

ASSIGNMENT

Social Security or taxpayer I.D. or other identifying number of assignee ____________

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto

(name and address of assignee)

the within Tranche {__} Storm Recovery Bond and all rights thereunder, and hereby irrevocably constitutes and appoints ____________, attorney, to transfer said Tranche {__} Storm Recovery Bond on the books kept for registration thereof, with full power of substitution in the premises.

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| | |
|:---|:---|
| Dated: ______________________________________________________ | |
|  | Signature Guaranteed: |

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The signature to this assignment must correspond with the name of the registered owner as it appears on the within Tranche {__} Storm Recovery Bond in every particular, without alteration, enlargement or any change whatsoever.

NOTE: Signature(s) must be guaranteed by an institution that is a member of: (i) The Securities Transfer Agent Medallion Program (STAMP); (ii) The New York Stock Exchange Medallion Program (MSP); (iii) the Stock Exchange Medallion Program (SEMP); or (iv) such other signature guaranty program acceptable to the Indenture Trustee.

<u>EXHIBIT B</u>

FORM OF SERIES SUPPLEMENT

See attached.

This SERIES SUPPLEMENT, dated as of {&nbsp;&nbsp;&nbsp;&nbsp; , 20 } (this "<u>Supplement</u>"), is by and between DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, a limited liability company created under the laws of the State of Delaware (the "<u>Issuer</u>"), and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION ("<u>Bank</u>"), in its capacity as indenture trustee (the "<u>Indenture Trustee</u>") for the benefit of the Secured Parties under the Indenture dated as of [Closing Date], 2025 (the "<u>Indenture</u>"), by and between the Issuer and U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION], in its capacity as Indenture Trustee and U.S. BANK NATIONAL ASSOCIATION, in its capacity as a securities intermediary and account bank.

PRELIMINARY STATEMENT

<u>Section 9.01</u> of the Indenture provides, among other things, that the Issuer and the Indenture Trustee may at any time enter into an indenture supplemental to the Indenture for the purposes of authorizing the issuance by the Issuer of the Storm Recovery Bonds and specifying the terms thereof. The Issuer has duly authorized the creation of the Storm Recovery Bonds with an initial aggregate principal amount of ${__________} to be known as Series {__}Senior Secured Storm Recovery Bonds (the "<u>Series {__} Storm Recovery Bonds</u>"), and the Issuer and the Indenture Trustee are executing and delivering this Supplement in order to provide for the Series {__} Storm Recovery Bonds.

All terms used in this Supplement that are defined in the Indenture, either directly or by reference therein, have the meanings assigned to them therein, except to the extent such terms are defined or modified in this Supplement or the context clearly requires otherwise. In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Supplement shall govern.

GRANTING CLAUSE

With respect to the Series {__} Storm Recovery Bonds, the Issuer hereby Grants to the Indenture Trustee, as Indenture Trustee for the benefit of the Secured Parties of the Series {__} Storm Recovery Bonds, all of the Issuer's right, title and interest (whether now owned or hereafter acquired or arising) in and to (a) the Storm Recovery Property created under and pursuant to the Financing Order and the Storm Recovery Law, and transferred by Duke Energy Carolinas, LLC , a North Carolina limited liability company to the Issuer on the date hereof pursuant to the Sale Agreement (including, to the fullest extent permitted by law, the right to impose, bill, charge, collect and receive the Storm Recovery Charges, the right to obtain periodic adjustments to the Storm Recovery Charges, and all revenue, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests created under the Financing Order), (b) all Storm Recovery Charges related to the Storm Recovery Property, (c) the Sale Agreement and the Bill of Sale executed in connection therewith and all property and interests in property transferred under the Sale Agreement and the Bill of Sale with respect to the Storm Recovery Property and the Series {__} Storm Recovery Bonds, (d) the Servicing Agreement, the Administration Agreement, the Intercreditor Agreements and any subservicing, agency, administration or collection agreements executed in connection therewith, to the extent related to the foregoing Storm Recovery Property and the Series {__} Storm Recovery Bonds, (e) the Collection Account for the Series {__} Storm Recovery Bonds, all subaccounts thereof and all amounts of cash, instruments, investment property or other assets on deposit therein or credited thereto from time to time and all financial assets and securities entitlements carried therein or credited thereto, (f) all rights to compel the Servicer to file for and obtain periodic adjustments to the Storm Recovery Charges in accordance with N.C. Gen. Stat. § 62-172(b)(3)b.6. and the Financing Order, (g) all present and future claims, demands, causes and choses in action in respect of any or all of the foregoing, whether such claims, demands, causes and choses in action constitute Storm Recovery Property, accounts, general intangibles, instruments, contract rights, chattel paper or proceeds of such items or any other form of property, (h) all accounts, chattel paper, deposit accounts, documents, general intangibles, goods, instruments, investment property, letters of credit, letters-of-credit rights, money, commercial tort claims and supporting obligations related to the foregoing, and (i) all payments on or under, and all proceeds in respect of, any or all of the foregoing (the "<u>Storm Recovery Collateral</u>"), **it being understood that the following do not constitute Storm Recovery Collateral**: (x) cash that has been released pursuant to the terms of the Indenture, including <u>Section 8.02(e)(x)</u> of the Indenture and, following retirement of all Outstanding Series {__} Storm Recovery Bonds, pursuant to <u>Section 8.02(e)(xii)</u> of the Indenture, (y) amounts deposited with the Issuer on the Closing Date, for payment of costs of issuance with respect to the Series {__} Storm Recovery Bonds (together with any interest earnings thereon) or (z) proceeds from the sale of the Series {__} Storm Recovery Bonds required to pay the purchase price for the Storm Recovery Property and paid pursuant to the Sale Agreement and upfront Financing Costs, it being understood that such amounts described in <u>clause (x)</u> and <u>clause (y)</u> above shall not be subject to <u>Section 3.17</u> of the Indenture. For the avoidance of doubt, any storm recovery property created with respect to an additional series of storm recovery bonds issued pursuant to another indenture shall not be Storm Recovery Collateral.

The foregoing Grant is made in trust to secure the Secured Obligations equally and ratably without prejudice, priority or distinction, except as expressly provided in the Indenture, to secure compliance with the provisions of the Indenture with respect to the Series {__} Storm Recovery Bonds, all as provided in the Indenture and to secure the performance by the Issuer of all of its obligations under the Indenture. The Indenture and this Supplement constitute a security agreement within the meaning of the Storm Recovery Law and under the UCC to the extent that the provisions of the UCC are applicable hereto.

The Indenture Trustee, as indenture trustee on behalf of the Secured Parties of the Series {__} Storm Recovery Bonds, acknowledges such Grant and accepts the trusts under this Supplement and the Indenture in accordance with the provisions of this Supplement and the Indenture.

SECTION 1.&nbsp;&nbsp;&nbsp;&nbsp; <u>Designation</u>. The Series {__} Storm Recovery Bonds shall be designated generally as the Storm Recovery Bonds {, and further denominated as Tranches {__} through {__}}.

SECTION 2.&nbsp;&nbsp;&nbsp;&nbsp; <u>Initial Principal Amount; Bond Interest Rate; Scheduled Final Payment Date; Final Maturity Date; Required Capital Level</u>. The Series {__} Storm Recovery Bonds {of each Tranche} shall have the initial principal amount, bear interest at the rates per annum (the "<u>Bond Interest Rate</u>") and shall have the Scheduled Final Payment Dates and the Final Maturity Dates set forth below:

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| | | | | |
|:---|:---|:---|:---|:---|
| Weighted <br> Average <br> Life | Initial<br>Principal<br>Amount | Bond<br>Interest<br>Rate | Scheduled<br>Final Payment<br>Date | Final<br>Maturity<br>Date |
| {__} | ${__________} | {____}% | {_____}, 20{__} | {_____}, 20{__} |
| {__} | ${__________} | {____}% | {_____}, 20{__} | {_____}, 20{__} |
| {__} | ${__________} | {____}% | {_____}, 20{__} | {_____}, 20{__} |

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The Bond Interest Rate shall be computed by the Issuer on the basis of a 360-day year of twelve 30-day months.

The Required Capital Level for the Series {__} Storm Recovery Bonds shall be equal to {__}% of the initial principal amount thereof.

SECTION 3.&nbsp;&nbsp;&nbsp;&nbsp; Authentication Date; Payment Dates; Expected Sinking Fund Schedule for Principal; Periodic Interest; Book-Entry Storm Recovery Bonds; Indenture Trustee Caps.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a)&nbsp;&nbsp;&nbsp;&nbsp; <u>Authentication Date</u>. The Series {__} Storm Recovery Bonds that are authenticated and delivered by the Indenture Trustee to or upon the order of the Issuer on {________} (the "Closing Date") shall have as their date of authentication {________}.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b)&nbsp;&nbsp;&nbsp;&nbsp; <u>Payment Dates</u>. The "<u>Payment Dates</u>" for the Series {__} Storm Recovery Bonds are {__________} and {__________} of each year or, if any such date is not a Business Day, the next Business Day, commencing on {__________}, 20{__} and continuing until the earlier of repayment of the Series {__} Storm Recovery Bonds in full and the Final Maturity Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c)&nbsp;&nbsp;&nbsp;&nbsp; <u>Expected Sinking Fund Schedule for Principal</u>. Unless an Event of Default shall have occurred and be continuing, on each Payment Date, the Indenture Trustee shall distribute to the Holders of record as of the related Record Date amounts payable pursuant to <u>Section 8.02(e)</u> of the Indenture as principal, in the following order and priority: {(1) to the holders of the Series {__}, Tranche {__} Storm Recovery Bonds, until the Outstanding Amount of such Series {__}, Tranche {__} Storm Recovery Bonds thereof has been reduced to zero; (2) to the holders of the Series {__}, Tranche {__}Storm Recovery Bonds, until the Outstanding Amount of such Series {__}, Tranche {__} Storm Recovery Bonds thereof has been reduced to zero; and (3) to the holders of the Series {__}, Tranche {__} Storm Recovery Bonds, until the Outstanding Amount of such Series {__}, Tranche {__} Storm Recovery Bonds thereof has been reduced to zero; <u>provided</u>, <u>however</u>, that in no event shall a principal payment pursuant to this <u>Section 3(c)</u> on any Tranche on a Payment Date be greater than the amount necessary to reduce the Outstanding Amount of such Tranche of Storm Recovery Bonds to the amount specified in the Expected Sinking Fund Schedule that is attached as <u>Schedule A</u> hereto for such Tranche and Payment Date}.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d)&nbsp;&nbsp;&nbsp;&nbsp; <u>Periodic Interest</u>. "<u>Periodic Interest</u>" will be payable on {each Tranche of} the Series {__} Storm Recovery Bonds on each Payment Date in an amount equal to one-half of the product of (i) the applicable Bond Interest Rate and (ii) the Outstanding Amount of the {related Tranche of} Series {__} Storm Recovery Bonds as of the close of business on the preceding Payment Date after giving effect to all payments of principal made to the Holders of the {related Tranche of} Series {__} Storm Recovery Bonds on such preceding Payment Date; <u>provided</u>, <u>however</u>, that, with respect to the initial Payment Date, or if no payment has yet been made, interest on the outstanding principal balance will accrue from and including the Closing Date to, but excluding, the following Payment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e)&nbsp;&nbsp;&nbsp;&nbsp; <u>Book-Entry Storm Recovery Bonds</u>. The Series {__} Storm Recovery Bonds shall be Book-Entry Storm Recovery Bonds, and the applicable provisions of <u>Section 2.11</u> of the Indenture shall apply to the Series {__} Storm Recovery Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f)&nbsp;&nbsp;&nbsp;&nbsp; <u>Indenture Trustee Cap</u>. The amount payable with respect to the Series {__} Storm Recovery Bonds pursuant to <u>Section 8.02(e)(i)</u> of the Indenture shall not exceed $200,000 annually; <u>provided, however</u>, that the Indenture Trustee Cap shall be disregarded and inapplicable upon the acceleration of the Storm Recovery Bonds following the occurrence of an Event of Default.

SECTION 4.&nbsp;&nbsp;&nbsp;&nbsp; <u>Authorized Denominations</u>. The Series {__} Storm Recovery Bonds shall be issuable in denominations of $2,000 and integral multiples of $1,000 in excess thereof, except for one bond, which may be a smaller denomination} (the "<u>Authorized Denominations</u>").

SECTION 5.&nbsp;&nbsp;&nbsp;&nbsp; <u>Delivery and Payment for the</u> Series {__} Storm <u>Recovery Bonds; Form of the Series {__} Storm Recovery Bonds</u>. The Indenture Trustee shall deliver the Series {__} Storm Recovery Bonds to the Issuer when authenticated in accordance with <u>Section 2.03</u> of the Indenture. The Series {__} Storm Recovery Bonds {of each Tranche} shall be in the form of Exhibit{s} {__} hereto.

SECTION 6.&nbsp;&nbsp;&nbsp;&nbsp; <u>Ratification of Indenture</u>. As supplemented by this Supplement, the Indenture is in all respects ratified and confirmed and the Indenture, as so supplemented by this Supplement, shall be read, taken and construed as one and the same instrument. This Supplement amends, modifies and supplements the Indenture only insofar as it relates to the Series {__} Storm Recovery Bonds.

SECTION 7.&nbsp;&nbsp;&nbsp;&nbsp; <u>Counterparts</u>. This Supplement may be executed in any number of counterparts, each of which so executed shall be deemed to be an original, but all of such counterparts shall together constitute but one and the same instrument.

SECTION 8.&nbsp;&nbsp;&nbsp;&nbsp; <u>Governing Law</u>. **This Supplement shall be governed by and construed in accordance with the laws of the State of New York, without reference to its conflict of law provisions (other than Section 5-1401 of the New York General Obligations Law and Sections 9-301 through 9-306 of the NY UCC), and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws; <u>provided</u>, that, the creation, attachment and perfection of any Liens created under the Indenture in Storm Recovery Property, and all rights and remedies of the Indenture Trustee and the Holders with respect to the Storm Recovery Property, shall be governed by the laws of the State of North Carolina.**

SECTION 9.&nbsp;&nbsp;&nbsp;&nbsp; <u>Issuer Obligation</u>. No recourse may be taken directly or indirectly by the Holders with respect to the obligations of the Issuer on the Series {__} Storm Recovery Bonds, under the Indenture or this Supplement or any certificate or other writing delivered in connection herewith or therewith, against (a) any owner of a beneficial interest in the Issuer (including Duke Energy Carolinas) or (b) any shareholder, partner, owner, beneficiary, officer, director, employee or agent of the Indenture Trustee, the Managers or any owner of a beneficial interest in the Issuer (including Duke Energy Carolinas) in its individual capacity, or of any successor or assign of any of them in their respective individual or corporate capacities, except as any such Person may have expressly agreed. Each Holder by accepting a Series {__} Storm Recovery Bond specifically confirms the nonrecourse nature of these obligations and waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Series {__} Storm Recovery Bonds.

SECTION 10.&nbsp;&nbsp;&nbsp;&nbsp; <u>Indenture Trustee Disclaimer</u>. The Indenture Trustee is not responsible for the validity or sufficiency of this Supplement or for the recitals contained herein.

SECTION 11.&nbsp;&nbsp;&nbsp;&nbsp; <u>Submission to Non-Exclusive Jurisdiction; Waiver of Jury Trial</u>. **Each of the Issuer and the Indenture Trustee and each Holder (by its acceptance of the Storm Recovery Bonds) hereby irrevocably submits to the non-exclusive jurisdiction of any New York State court sitting in The Borough of Manhattan in The City of New York or any U.S. federal court sitting in The Borough of Manhattan in The City of New York in respect of any suit, action or proceeding arising out of or relating to this Supplement and the Series {__} Storm Recovery Bonds and irrevocably accepts for itself and in respect of its respective property, generally and unconditionally, jurisdiction of the aforesaid courts. Each of the Issuer and the Indenture Trustee irrevocably waives, to the fullest extent that it may effectively do so under applicable law, trial by jury.**

IN WITNESS WHEREOF, the Issuer, the Indenture Trustee, the Securities Intermediary and the Account Bank have caused this Supplement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

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| | |
|:---|:---|
| DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br>as Issuer | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br>as Issuer |
| By: |  |
|  | Name: |
|  | Title: |
| U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br>not in its individual capacity but solely as Indenture Trustee | U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br>not in its individual capacity but solely as Indenture Trustee |
| By: |  |
|  | Name: |
|  | Title: |
| U.S. BANK NATIONAL ASSOCIATION,<br>not in its individual capacity but solely as Securities Intermediary and Account Bank | U.S. BANK NATIONAL ASSOCIATION,<br>not in its individual capacity but solely as Securities Intermediary and Account Bank |
| By: |  |
|  | Name: |
|  | Title: |

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SCHEDULE A<br>TO SERIES SUPPLEMENT

Expected SINKING FUND Schedule

Outstanding Principal Balance

---

| | |
|:---|:---|
| Date | Tranche {__} |
| Closing Date | ${__________} |
| {__________}, 20{__} | ${__________} |
| {__________}, 20{__} | ${__________} |
| {__________}, 20{__} | ${__________} |

---

EXHIBIT {__}<br>TO SERIES SUPPLEMENT

FORM OF {SERIES {__} TRANCHE {__} OF} STORM RECOVERY BONDS

{__________}

<u>EXHIBIT C</u>

SERVICING CRITERIA TO BE ADDRESSED<br>BY INDENTURE TRUSTEE IN ASSESSMENT OF COMPLIANCE

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| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Regulation AB<br> Reference** | &nbsp;&nbsp;**Servicing Criteria** | &nbsp;&nbsp;**Applicable Indenture<br> Trustee Responsibility** |
|  | &nbsp;&nbsp;**General Servicing Considerations** |  |
| &nbsp;&nbsp;1122(d)(1)(i) | &nbsp;&nbsp;Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(1)(ii) | &nbsp;&nbsp;If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party's performance and compliance with such servicing activities. |  |
| &nbsp;&nbsp;1122(d)(1)(iii) | &nbsp;&nbsp;Any requirements in the transaction agreements to maintain a back-up servicer for the pool assets are maintained. |  |
| &nbsp;&nbsp;1122(d)(1)(iv) | &nbsp;&nbsp;A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(1)(v) | &nbsp;&nbsp;Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information. |  |
|  | &nbsp;&nbsp;**Cash Collection and Administration** |  |
| &nbsp;&nbsp;1122(d)(2)(i) | &nbsp;&nbsp;Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;**X** |
| &nbsp;&nbsp;1122(d)(2)(ii) | &nbsp;&nbsp;Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. | &nbsp;&nbsp;**X** |
| &nbsp;&nbsp;1122(d)(2)(iii) | &nbsp;&nbsp;Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(2)(iv) | &nbsp;&nbsp;The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. | &nbsp;&nbsp;**X** |
| &nbsp;&nbsp;1122(d)(2)(v) | &nbsp;&nbsp;Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, "federally insured depository institution" with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) under the Exchange Act. | &nbsp;&nbsp;**X** |
| &nbsp;&nbsp;1122(d)(2)(vi) | &nbsp;&nbsp;Unissued checks are safeguarded so as to prevent unauthorized access. |  |
| &nbsp;&nbsp;1122(d)(2)(vii) | &nbsp;&nbsp;Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are: (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. |  |
|  | &nbsp;&nbsp;**Investor Remittances and Reporting** |  |
| &nbsp;&nbsp;1122(d)(3)(i) | &nbsp;&nbsp;Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports: (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors' or the trustee's records as to the total unpaid principal balance and number of pool assets serviced by the servicer. |  |
| &nbsp;&nbsp;1122(d)(3)(ii) | &nbsp;&nbsp;Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. | &nbsp;&nbsp;**X** |
| &nbsp;&nbsp;1122(d)(3)(iii) | &nbsp;&nbsp;Disbursements made to an investor are posted within two business days to the servicer's investor records, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;**X** |

---

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Regulation AB<br> Reference** | &nbsp;&nbsp;**Servicing Criteria** | &nbsp;&nbsp;**Applicable Indenture<br> Trustee Responsibility** |
| &nbsp;&nbsp;1122(d)(3)(iv) | &nbsp;&nbsp;Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. | &nbsp;&nbsp;**X** |
|  | &nbsp;&nbsp;**Pool Asset Administration** |  |
| &nbsp;&nbsp;1122(d)(4)(i) | &nbsp;&nbsp;Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. |  |
| &nbsp;&nbsp;1122(d)(4)(ii) | &nbsp;&nbsp;Pool assets and related documents are safeguarded as required by the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(iii) | &nbsp;&nbsp;Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(iv) | &nbsp;&nbsp;Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer's obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset documents. |  |
| &nbsp;&nbsp;1122(d)(4)(v) | &nbsp;&nbsp;The servicer's records regarding the pool assets agree with the servicer's records with respect to an obligor's unpaid principal balance. |  |
| &nbsp;&nbsp;1122(d)(4)(vi) | &nbsp;&nbsp;Changes with respect to the terms or status of an obligor's pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. |  |
| &nbsp;&nbsp;1122(d)(4)(vii) | &nbsp;&nbsp;Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(viii) | &nbsp;&nbsp;Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity's activities in monitoring delinquent pool assets, including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). |  |
| &nbsp;&nbsp;1122(d)(4)(ix) | &nbsp;&nbsp;Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. |  |
| &nbsp;&nbsp;1122(d)(4)(x) | &nbsp;&nbsp;Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor's pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(xi) | &nbsp;&nbsp;Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(xii) | &nbsp;&nbsp;Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer's funds and not charged to the obligor, unless the late payment was due to the obligor's error or omission. |  |
| &nbsp;&nbsp;1122(d)(4)(xiii) | &nbsp;&nbsp;Disbursements made on behalf of an obligor are posted within two business days to the obligor's records maintained by the servicer, or such other number of days specified in the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(xiv) | &nbsp;&nbsp;Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. |  |
| &nbsp;&nbsp;1122(d)(4)(xv) | &nbsp;&nbsp;Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. |  |

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<u>APPENDIX A</u>

**DEFINITIONS AND RULES OF CONSTRUCTION**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. <u>Defined Terms</u>. The following terms have the following meanings:

"<u>17g-5 Website</u>" is defined in <u>Section 10.18(a)</u> of the Indenture.

"<u>Account Bank</u>" means U.S. Bank National Association, a national banking association, solely in the capacity of an "account bank," as defined in the NY UCC and Federal Book-Entry Regulations, or any successor account bank under the Indenture.

"<u>Account Records</u>" is defined in <u>Section 1(a)(i)</u> of the Administration Agreement.

"<u>Act</u>" is defined in <u>Section 10.03(a)</u> of the Indenture.

"<u>Administration Agreement</u>" means the Administration Agreement, dated as of the date hereof, by and between Duke Energy Carolinas and the Issuer.

"<u>Administration Fee</u>" is defined in <u>Section 2</u> of the Administration Agreement.

"<u>Administrator</u>" means Duke Energy Carolinas, as Administrator under the Administration Agreement, or any successor Administrator to the extent permitted under the Administration Agreement.

"<u>Affiliate</u>" means, with respect to any specified Person, any other Person controlling or controlled by or under common control with such specified Person. For the purposes of this definition, "control" when used with respect to any specified Person means the power to direct the management and policies of such specified Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"<u>Amendatory Schedule</u>" means a revision to service riders or any other notice filing filed with the Commission in respect of the Storm Recovery Rate Schedule pursuant to a True-Up Adjustment.

"<u>Annual Accountant's Report</u>" is defined in <u>Section 3.04(a)</u> of the Servicing Agreement.

"<u>Applicable Law</u>" is defined in <u>Section 6.16</u> of the Indenture.

"<u>Authorized Denomination</u>" means, with respect to any Storm Recovery Bond, the authorized denomination therefor specified in the Series Supplement, which shall be at least $2,000 and, except as otherwise provided in the Series Supplement, integral multiples of $1,000 in excess thereof, except for one Storm Recovery bond which may be of a smaller denomination.

"<u>Bankruptcy Code</u>" means Title 11 of the United States Code (11 U.S.C. §§ 101 <u>et seq</u>.).

"<u>Basic Documents</u>" means the Indenture, Series Supplement, Certificate of Formation, LLC Agreement, Administration Agreement, Sale Agreement, Bill of Sale, Servicing Agreement, Intercreditor Agreements, the joinder to the DEBS Intercreditor Agreement, Letter of Representations, Underwriting Agreement and all other documents and certificates delivered in connection therewith.

"<u>Bill of Sale</u>" means a bill of sale substantially in the form of <u>Exhibit A</u> to the Sale Agreement delivered pursuant to <u>Section 2.02(a)</u> of the Sale Agreement.

"<u>Billed Storm Recovery Charges</u>" means the amounts of Storm Recovery Charges billed by the Servicer.

"<u>Bills</u>" means each of the regular monthly bills, summary bills, opening bills and closing bills issued to Customers by Duke Energy Carolinas in its capacity as Servicer.

"<u>Bond Interest Rate</u>" means, with respect to any Tranche of Storm Recovery Bonds, the rate at which interest accrues on the Storm Recovery Bonds of such Tranche, as specified in the Series Supplement.

"<u>Book-Entry Form</u>" means, with respect to any Storm Recovery Bond, that such Storm Recovery Bond is not certificated and the ownership and transfers thereof shall be made through book entries by a Clearing Agency as described in <u>Section 2.11</u> of the Indenture and the Series Supplement pursuant to which such Storm Recovery Bond was issued.

"<u>Book-Entry Storm Recovery Bonds</u>" means any Storm Recovery Bonds issued in Book-Entry Form; <u>provided</u>, <u>however</u>, that, after the occurrence of a condition whereupon book-entry registration and transfer are no longer permitted and Definitive Storm Recovery Bonds are to be issued to the Holder of such Storm Recovery Bonds, such Storm Recovery Bonds shall no longer be "Book-Entry Storm Recovery Bonds".

"<u>Business Day</u>" means any day other than a Saturday, a Sunday or a day on which banking institutions in Charlotte, North Carolina or New York, New York are, or DTC or the Corporate Trust Office is, authorized or obligated by law, regulation or executive order to be closed.

"<u>Capital Contribution</u>" means the amount of cash contributed to the Issuer by Duke Energy Carolinas as specified in the LLC Agreement.

"<u>Capital Subaccount</u>" is defined in <u>Section 8.02(a)</u> of the Indenture.

"<u>Certificate of Compliance</u>" means the certificate referred to in <u>Section 3.03</u> of the Servicing Agreement and substantially in the form of <u>Exhibit E</u> to the Servicing Agreement.

"<u>Certificate of Formation</u>" means the Certificate of Formation filed with the Secretary of State of the State of Delaware on July 14, 2025 pursuant to which the Issuer was formed.

"<u>Claim</u>" means a "claim" as defined in <u>Section 101(5)</u> of the Bankruptcy Code.

"<u>Clearing Agency</u>" means an organization registered as a "clearing agency" pursuant to <u>Section 17A</u> of the Exchange Act.

"<u>Clearing Agency Participant</u>" means a securities broker, dealer, bank, trust company, clearing corporation or other financial institution or other Person for whom from time to time a Clearing Agency effects book entry transfers and pledges of securities deposited with such Clearing Agency.

"<u>Closing Date</u>" means the date on which the Storm Recovery Bonds are originally issued in accordance with <u>Section 2.10</u> of the Indenture and the Series Supplement.

"<u>Code</u>" means the Internal Revenue Code of 1986.

"<u>Collection Account</u>" is defined in <u>Section 8.02(a)</u> of the Indenture.

"<u>Collection in Full of the Charges</u>" means the day on which the aggregate amounts on deposit in the General Subaccount and the Excess Funds Subaccount are sufficient to pay in full all the Outstanding Storm Recovery Bonds and to replenish any shortfall in the Capital Subaccount.

"<u>Collection Period</u>" means any period commencing on the first Servicer Business Day of any Billing Period and ending on the last Servicer Business Day of such Billing Period.

"<u>Commission</u>" means the North Carolina Utilities Commission.

"<u>Commission Condition</u>" means the satisfaction of any precondition to any amendment or modification to or action under any Basic Documents through the obtaining of Commission consent or acquiescence, as described in the related Basic Document.

"<u>Commission Regulations</u>" means any orders issued or rules or regulations, including temporary regulations, promulgated by the Commission pursuant to North Carolina law.

"<u>Company Minutes</u>" is defined in <u>Section 1(a)(iv)</u> of the Administration Agreement.

"<u>Corporate Trust Office</u>" means the office of the Indenture Trustee at which, at any particular time, its corporate trust business shall be administered, which office (for all purposes other than registration of transfer of the Storm Recovery Bonds) as of the date hereof is located at 190 S. LaSalle Street, 7th Floor, Chicago, IL 60603, Attention: Duke Energy Carolinas NC Storm Funding II LLC, Series A, and for registration of transfers of Storm Recovery Bonds, the office is located at 111 Fillmore Avenue East, St. Paul, MN 55107, Attention: Bondholder Services— Duke Energy Carolinas NC Storm Funding II LLC, Series A, or at such other address as the Indenture Trustee may designate from time to time by notice to the Holders of Storm Recovery Bonds and the Issuer, or the principal corporate trust office of any successor trustee designated by like notice.

"<u>Covenant Defeasance Option</u>" is defined in <u>Section 4.01(b)</u> of the Indenture.

"<u>Customer</u>" means any existing or future retail customer (including individuals, corporations, other businesses, and federal, state and local governmental entities) receiving transmission or distribution service from Duke Energy Carolinas or its successors or assignees under Commission-approved rate schedules or under special contracts, even if such customer elects to purchase electricity from a TPS following a fundamental change in regulation of public utilities in North Carolina.

"<u>Daily Remittance</u>" is defined in <u>Section 6.11(a)</u> of the Servicing Agreement.

"<u>DEBS Intercreditor Agreement</u>" means the Amended and Restated Intercreditor Agreement, dated December 20, 2013, by and among Duke Energy Business Services, Inc., Duke Energy Corporate Services Inc., Duke Energy Corporation, Duke Energy Progress, LLC, Duke Energy Ohio, Inc., Duke Energy Carolinas NC Storm Funding LLC, Duke Energy Progress NC Storm Funding LLC, Duke Energy Progress SC Storm Funding LLC, Duke Energy Progress NC Storm Funding II LLC, the Issuer, the Indenture Trustee (as trustee of Duke Energy Progress SC Storm Funding LLC), the Indenture Trustee (as trustee of Duke Energy Carolinas NC Storm Funding II LLC), the Indenture Trustee (as trustee of Duke Energy Progress NC Storm Funding II LLC), the Bank of New York Mellon Trust Company, N.A. (as trustee of Duke Energy Progress NC Storm Funding LLC), the Bank of New York Mellon Trust Company, N.A. (as trustee of Duke Energy Carolinas NC Storm Funding LLC), and DEC, as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>DEC Intercreditor Agreement</u>" means the intercreditor agreement, dated as of the date hereof, by and among the Bank of New York Mellon Trust Company, N.A. (as trustee of Duke Energy Carolinas Storm Funding LLC), the Indenture Trustee (as trustee of Duke Energy Carolinas NC Storm Funding II LLC), Duke Energy Carolinas NC Storm Funding LLC, the Issuer, DEC as the same may be amended, restated, supplemented or otherwise modified from time to time.

"<u>Default</u>" means any occurrence that is, or with notice or the lapse of time or both would become, an Event of Default.

"<u>Definitive Storm Recovery Bonds</u>" is defined in <u>Section 2.11</u> of the Indenture.

"<u>Delaware UCC</u>" means the Uniform Commercial Code as in effect on the Closing Date in the State of Delaware.

"<u>Depositor</u>" means Duke Energy Carolinas, in its capacity as "depositor" of the Storm Recovery Property within the meaning of Regulation AB.

"<u>DTC</u>" means The Depository Trust Company.

"<u>Duke Energy Carolinas</u>" or "<u>DEC</u>" means Duke Energy Carolinas, LLC, a North Carolina limited liability company.

"<u>Duke Energy Carolinas NC Storm Funding II LLC</u>" means the Issuer.

"<u>Eligible Account</u>" means a segregated non-interest-bearing trust account with an Eligible Institution.

"<u>Eligible Institution</u>" means:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) the corporate trust department of the Indenture Trustee or an Affiliate thereof, so long as the Indenture Trustee or such Affiliate have (i) either a short-term deposit or issuer rating from Moody's of at least "P-1" or a long-term unsecured debt or issuer rating from Moody's of at least "A2", and (ii) a short-term deposit or issuer rating from S&P of at least "A-1", or a long-term unsecured debt or issuer rating from S&P of at least "A"; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) a depository institution organized under the laws of the United States of America or any State (or any domestic branch of a foreign bank)

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) that has either (A) a long-term unsecured debt or issuer rating of "AA-" or higher by S&P and "A2" or higher by Moody's, or (B) a short-term (bank deposit) or issuer rating of "A-1" or higher by S&P and "P-1" or higher by Moody's, and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) whose deposits are insured by the Federal Deposit Insurance Corporation;

<u>provided</u>, <u>however</u>, that if an Eligible Institution then being utilized for any purposes under the Indenture or the Series Supplement no longer meets the definition of Eligible Institution, then the Issuer shall replace such Eligible Institution within sixty (60) days of such Eligible Institution no longer meeting the definition of Eligible Institution.

"<u>Eligible Investments</u>" means:

Funds in the Collection Account may be invested at the written direction of the Servicer only in such investments as meet the criteria described below and which mature on or before the Business Day immediately preceding the next Payment Date:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) direct obligations of, or obligations fully and unconditionally guaranteed as to timely payment by, the United States of America;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) demand or time deposits of, unsecured certificates of deposit of, money market deposit accounts of or bankers' acceptances issued by, any depository institution (including the Indenture Trustee or any of its Affiliates, acting in its commercial capacity) incorporated or organized under the laws of the United States of America or any State thereof and subject to supervision and examination by U.S. federal or State banking authorities, so long as the commercial paper or other short-term debt obligations of such depository institution are, at the time of deposit or contractual commitment, rated at least "A-1" and "P-1" or their equivalents by each of S&P and Moody's, or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(3) commercial paper (including commercial paper of the Indenture Trustee, acting in its commercial capacity, and other commercial paper of DEC or any of its Affiliates), which, at the time of purchase is rated at least "A-1" or "P-1" or their equivalents by each of S&P and Moody's or such lower rating as will not result in the downgrading or withdrawal of the ratings of the Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(4) investments in money market funds which have a rating in the highest investment category granted thereby (including funds for which the Indenture Trustee or any of its Affiliates is investment manager or advisor) from Moody's and S&P;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(5) repurchase obligations with respect to any security that is a direct obligation of, or fully guaranteed by, the United States of America or its agencies or instrumentalities, entered into with Eligible Institutions;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(6) repurchase obligations with respect to any security or whole loan entered into with an Eligible Institution or with a registered broker/dealer acting as principal and that meets the ratings criteria set forth below:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a. a broker/dealer (acting as principal) registered as a broker or dealer under Section 15 of the Exchange Act (any such broker/dealer being referred to in this definition as a "broker/dealer"), the unsecured short-term debt obligations of which are rated at least "P-1" by Moody's and "A-1+" by S&P at the time of entering into such repurchase obligation; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b. an unrated broker/dealer, acting as principal, that is a wholly-owned subsidiary of a non-bank or bank holding company the unsecured short-term debt obligations of which are rated at least "P-1" by Moody's and "A-1+" by S&P at the time of purchase so long as the obligations of such unrated broker/dealer are unconditionally guaranteed by such non-bank or bank holding company; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(7) any other investment permitted by each Rating Agency;

Notwithstanding the foregoing: (a) no securities or investments which mature in 30 days or more will be Eligible Investments unless the Issuer thereof has either a short-term unsecured debt rating of at least "P-1" from Moody's or a long-term unsecured debt rating of at least "A1" from Moody's; (b) no securities or investments described in clauses (2) through (4) above which have maturities of more than 30 days but less than or equal to 3 months will be Eligible Investments unless the Issuer thereof has a long-term unsecured debt rating of at least "A1" from Moody's and a short-term unsecured debt rating of at least "P-1" from Moody's; (c) no securities or investments described in clauses (2) through (4) above which have maturities of more than 3 months will be Eligible Investments unless the Issuer thereof has a long-term unsecured debt rating of at least "A1" from Moody's and a short-term unsecured debt rating of at least "P-1" from Moody's; (d) no securities or investments described in clauses (2) through (4) above which have a maturity of 60 days or less will be Eligible Investments unless such securities have a rating from S&P of at least "A-1"; and (e) no securities or investments described in clauses (2) through (4) above which have a maturity of 365 days or less will be Eligible Investments unless such securities have a rating from S&P of at least "AA-", "A-1+" or "AAAm".

"<u>ERISA</u>" means the Employee Retirement Income Security Act of 1974, as amended.

"<u>Event of Default</u>" is defined in <u>Section 5.01</u> of the Indenture.

"<u>Excess Funds Subaccount</u>" is defined in <u>Section 8.02(a)</u> of the Indenture.

"<u>Exchange Act</u>" means the Securities Exchange Act of 1934, as amended.

"<u>Expected Sinking Fund Schedule</u>" means, with respect to any Tranche, the expected sinking fund schedule related thereto set forth in the Series Supplement.

"<u>Federal Book-Entry Regulations</u>" means 31 C.F.R. Part 357 <u>et seq</u>. (Department of Treasury).

"<u>Final</u>" means, with respect to the Financing Order, that the Financing Order has become final, that the Financing Order is not being appealed and that the time for filing an appeal thereof has expired.

"<u>Final Maturity Date</u>" means, with respect to each Tranche of Storm Recovery Bonds, the final maturity date therefor as specified in the applicable Series Supplement.

"<u>Financing Costs</u>" means all financing costs as defined in <u>Section 62-172(a)(4)</u>of the Storm Recovery Law allowed to be recovered by Duke Energy Carolinas under the Financing Order.

"<u>Financing Order</u>" means the financing order issued by the Commission to Duke Energy Carolinas on June 18, 2025, Docket No. E-7, Sub 1325, authorizing the creation of the Storm Recovery Property.

"<u>Financing Party</u>" means any and all of the following: the Holders, the Indenture Trustee, Duke Energy Carolinas, collateral agents, any party under the Basic Documents, or any other person acting for the benefit of the Holders.

"<u>General Subaccount</u>" is defined in <u>Section 8.02(a)</u> of the Indenture.

"<u>Global Storm Recovery Bond</u>" means a Storm Recovery Bond to be issued to the Holders thereof in Book-Entry Form, which Global Storm Recovery Bond shall be issued to the Clearing Agency, or its nominee, in accordance with <u>Section 2.11</u> of the Indenture and the Series Supplement.

"<u>Governmental Authority</u>" means any nation or government, any U.S. federal, state, local or other political subdivision thereof and any court, administrative agency or other instrumentality or entity exercising executive, legislative, judicial, regulatory or administrative functions of government.

"<u>Grant</u>" means mortgage, pledge, bargain, sell, warrant, alienate, remise, release, convey, grant, transfer, create, grant a lien upon, a security interest in and right of set-off against, deposit, set over and confirm pursuant to the Indenture and the Series Supplement. A Grant of the Collateral shall include all rights, powers and options (but none of the obligations) of the granting party thereunder, including the immediate and continuing right to claim for, collect, receive and give receipt for payments in respect of the Collateral and all other moneys payable thereunder, to give and receive notices and other communications, to make waivers or other agreements, to exercise all rights and options, to bring Proceedings in the name of the granting party or otherwise and generally to do and receive anything that the granting party is or may be entitled to do or receive thereunder or with respect thereto.

"<u>Holder</u>" means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.

"<u>Indemnified Losses</u>" is defined in <u>Section 5.03</u> of the Servicing Agreement.

"<u>Indemnified Party</u>" is defined in <u>Section 6.02(a)</u> of the Servicing Agreement.

"<u>Indemnified Person</u>" is defined in <u>Section 5.01(e)</u> of the Sale Agreement.

"<u>Indenture</u>" means the Indenture, dated as of the date hereof, by and between the Issuer and U.S. Bank Trust Company, National Association, as Indenture Trustee and U.S. Bank National Association, as Securities Intermediary and Account Bank.

"<u>Indenture Trustee</u>" means U.S. Bank Trust Company, National Association, a national banking association, as indenture trustee for the benefit of the Secured Parties, or any other indenture trustee for the benefit of the Secured Parties, under the Indenture.

"<u>Indenture Trustee Cap</u>" is defined in <u>Section 8.02(e)(i)</u> of the Indenture.

"<u>Independent</u>" means, when used with respect to any specified Person, that such specified Person (a) is in fact independent of the Issuer, any other obligor on the Storm Recovery Bonds, the Seller, the Servicer and any Affiliate of any of the foregoing Persons, (b) does not have any direct financial interest or any material indirect financial interest in the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons and (c) is not connected with the Issuer, any such other obligor, the Seller, the Servicer or any Affiliate of any of the foregoing Persons as an officer, employee, promoter, underwriter, trustee, partner, director (other than as an independent director or manager) or person performing similar functions.

"<u>Independent Certificate</u>" means a certificate to be delivered to the Indenture Trustee under the circumstances described in, and otherwise complying with, the applicable requirements of <u>Section 10.01</u> of the Indenture, made by an Independent appraiser or other expert appointed by an Issuer Order and consented to by the Indenture Trustee, and such certificate shall state that the signer has read the definition of "Independent" in the Indenture and that the signer is Independent within the meaning thereof.

"<u>Independent Manager</u>" is defined in <u>Section 4.01(a)</u> of the LLC Agreement.

"<u>Independent Manager Fee</u>" is defined in <u>Section 4.01(a)</u> of the LLC Agreement.

"<u>Insolvency Event</u>" means, with respect to a specified Person: (a) the filing of a decree or order for relief by a court having jurisdiction in the premises in respect of such specified Person or any substantial part of its property in an involuntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the date hereof or thereafter, or appointing a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or ordering the winding-up or liquidation of such specified Person's affairs, and such decree or order shall remain unstayed and in effect for a period of 60 consecutive days; or (b) the commencement by such specified Person of a voluntary case under any applicable U.S. federal or state bankruptcy, insolvency or other similar law in effect as of the Closing Date or thereafter, or the consent by such specified Person to the entry of an order for relief in an involuntary case under any such law, or the consent by such specified Person to the appointment of or taking possession by a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for such specified Person or for any substantial part of its property, or the making by such specified Person of any general assignment for the benefit of creditors, or the failure by such specified Person generally to pay its debts as such debts become due, or the taking of action by such specified Person in furtherance of any of the foregoing.

"<u>Intercreditor Agreements</u>" means the DEBS Intercreditor Agreement and the DEC Intercreditor Agreement.

"<u>Interim True-Up Adjustment</u>" means each adjustment to the Storm Recovery Charges made pursuant to <u>Section 4.01(b)(ii)</u> of the Servicing Agreement.

"<u>Investment Company Act</u>" means the Investment Company Act of 1940, as amended.

"<u>Investment Earnings</u>" means investment earnings on funds deposited in the Collection Account net of losses and investment expenses.

"<u>Issuer</u>" means Duke Energy Carolinas NC Storm Funding II LLC, a Delaware limited liability company, named as such in the Indenture until a successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the Trust Indenture Act, each other obligor on the Storm Recovery Bonds.

"<u>Issuer Documents</u>" is defined in <u>Section 1(a)(iv)</u> of the Administration Agreement.

"<u>Issuer Order</u>" means a written order signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.

"<u>Issuer Request</u>" means a written request signed in the name of the Issuer by any one of its Responsible Officers and delivered to the Indenture Trustee or Paying Agent, as applicable.

"<u>Legal Defeasance Option</u>" is defined in <u>Section 4.01(b)</u> of the Indenture.

"<u>Letter of Representations</u>" means any applicable agreement between the Issuer and the applicable Clearing Agency, with respect to such Clearing Agency's rights and obligations (in its capacity as a Clearing Agency) with respect to any Book-Entry Storm Recovery Bonds.

"<u>Lien</u>" means a security interest, lien, mortgage, charge, pledge, claim or encumbrance of any kind.

"<u>LLC Agreement</u>" means the Amended and Restated Limited Liability Company Agreement of Duke Energy Carolinas NC Storm Funding II LLC, dated as of [ ], 2025.

"<u>Losses</u>" means (a) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amounts of any deposits by or to the Issuer required to have been made in accordance with the terms of the Basic Documents or the Financing Order that are not made when so required and (b) any and all other liabilities, obligations, losses, claims, damages, payments, costs or expenses of any kind whatsoever.

"<u>Manager</u>" means each manager of the Issuer under the LLC Agreement.

"<u>Member</u>" has the meaning specified in the first paragraph of the LLC Agreement.

"<u>Monthly Servicer's Certificate</u>" is defined in <u>Section 3.01(b)(i)</u> of the Servicing Agreement.

"<u>Moody's</u>" means Moody's Investors Service, Inc. References to Moody's are effective so long as Moody's is a Rating Agency.

"<u>North Carolina UCC</u>" means the Uniform Commercial Code as in effect on the Closing Date in the State of North Carolina.

"<u>NRSRO</u>" is defined in <u>Section 10.18(b)</u> of the Indenture.

"<u>NY UCC</u>" means the Uniform Commercial Code as in effect on the date hereof in the State of New York.

"<u>Officer's Certificate</u>" means a certificate signed by a Responsible Officer of the Issuer under the circumstances described in, and otherwise complying with, the applicable requirements of <u>Section 10.01</u> of the Indenture, and delivered to the Indenture Trustee.

"<u>On-going Financing Costs</u>" means the Financing Costs described as such in the Financing Order, including Operating Expenses and any other costs identified in the Basic Documents; <u>provided</u>, <u>however</u>, that On-going Financing Costs do not include the Issuer's costs of issuance of the Storm Recovery Bonds.

"<u>Operating Expenses</u>" means all unreimbursed fees, costs and out-of-pocket expenses of the Issuer, including all amounts owed by the Issuer to the Indenture Trustee (including indemnities, legal, audit fees and expenses) or any Manager, the Servicing Fee, the Administration Fee, legal and accounting fees, Rating Agency fees, any regulatory assessment fees and related fees (i.e. website provider fees) and any franchise, license or other taxes owed by the Issuer, including on investment income in the Collection Account.

"<u>Opinion of Counsel</u>" means one or more written opinions of counsel, who may, except as otherwise expressly provided in the Basic Documents, be employees of or counsel to the party providing such opinion of counsel, which counsel shall be reasonably acceptable to the party receiving such opinion of counsel, and shall be in form and substance reasonably acceptable to such party.

"<u>Outstanding</u>" means, as of the date of determination, all Storm Recovery Bonds theretofore authenticated and delivered under the Indenture, except:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Storm Recovery Bonds theretofore canceled by the Storm Recovery Bond Registrar or delivered to the Storm Recovery Bond Registrar for cancellation;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Storm Recovery Bonds or portions thereof the payment for which money in the necessary amount has been theretofore deposited with the Indenture Trustee or any Paying Agent in trust for the Holders of such Storm Recovery Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Storm Recovery Bonds in exchange for or in lieu of other Storm Recovery Bonds that have been issued pursuant to the Indenture unless proof satisfactory to the Indenture Trustee is presented that any such Storm Recovery Bonds are held by a Protected Purchaser; <u>provided</u>, that, in determining whether the Holders of the requisite Outstanding Amount of the Storm Recovery Bonds or any Tranche thereof have given any request, demand, authorization, direction, notice, consent or waiver under any Basic Document, Storm Recovery Bonds owned by the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons shall be disregarded and deemed not to be Outstanding (unless one or more such Persons owns 100% of such Storm Recovery Bonds), except that, in determining whether the Indenture Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Storm Recovery Bonds that the Indenture Trustee actually knows to be so owned shall be so disregarded. Storm Recovery Bonds so owned that have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Indenture Trustee the pledgee's right so to act with respect to such Storm Recovery Bonds and that the pledgee is not the Issuer, any other obligor upon the Storm Recovery Bonds, the Member, the Seller, the Servicer or any Affiliate of any of the foregoing Persons.

"<u>Outstanding Amount</u>" means the aggregate principal amount of all Storm Recovery Bonds, or, if the context requires, all Storm Recovery Bonds of a Tranche, Outstanding at the date of determination.

"<u>Paying Agent</u>" means, with respect to the Indenture, the Indenture Trustee and any other Person appointed as a paying agent for the Storm Recovery Bonds pursuant to the Indenture.

"<u>Payment Date</u>" means, with respect to any Tranche of Storm Recovery Bonds, the dates specified in the Series Supplement; <u>provided</u>, that if any such date is not a Business Day, the Payment Date shall be the Business Day succeeding such date.

"<u>Periodic Billing Requirement</u>" means, for any Remittance Period, the aggregate amount of Storm Recovery Charges calculated by the Servicer as necessary to be billed during such period in order to collect the Periodic Payment Requirement on a timely basis.

"<u>Periodic Interest</u>" means, with respect to any Payment Date, the periodic interest for such Payment Date as specified in the Series Supplement.

"<u>Periodic Payment Requirement</u>" for any Remittance Period means the total dollar amount of Storm Recovery Charge Collections reasonably calculated by the Servicer in accordance with Section 4.01 of the Servicing Agreement as necessary to be received during such Remittance Period (after giving effect to the allocation and distribution of amounts on deposit in the Excess Funds Subaccount at the time of calculation and that are projected to be available for payments on the Storm Recovery Bonds at the end of such Remittance Period and including any shortfalls in Periodic Payment Requirements for any prior Remittance Period) in order to ensure that, as of the last Payment Date occurring in such Remittance Period, (a) all accrued and unpaid principal of and interest on the Storm Recovery Bonds then due shall have been paid in full on a timely basis, (b) the Outstanding Amount of the Storm Recovery Bonds is equal to the Projected Unpaid Balance on each Payment Date during such Remittance Period, (c) the balance on deposit in the Capital Subaccount equals the Required Capital Level and (d) all other fees and expenses due and owing and required or allowed to be paid under Section 8.02 of the Indenture as of such date shall have been paid in full; provided, that, with respect to any Semi-Annual True-Up Adjustment or Interim True-Up Adjustment occurring after the date that is one year prior to the last Scheduled Final Payment Date for the Storm Recovery Bonds, the Periodic Payment Requirements shall be calculated to ensure that sufficient Storm Recovery Charges will be collected to retire the Storm Recovery Bonds in full as of the next Payment Date.

"<u>Periodic Principal</u>" means, with respect to any Payment Date, the excess, if any, of the Outstanding Amount of Storm Recovery Bonds over the outstanding principal balance specified for such Payment Date on the Expected Sinking Fund Schedule.

"<u>Permitted Successor</u>" means any Person (a) into which the Seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the Seller, (b) which results from the division of the Seller into two or more Persons and which succeeds to all or substantially all of the electric distribution business of the Seller, (c) which may result from any merger or consolidation to which the Seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the Seller, (d) which may succeed to the properties and assets of the Seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the Seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the Seller.

"<u>Person</u>" means any individual, corporation, limited liability company, estate, partnership, joint venture, association, joint stock company, trust (including any beneficiary thereof), unincorporated organization or Governmental Authority.

"<u>Plan</u>" means an employee benefit plan (as defined in Section 3(3) of ERISA) subject to Title I of ERISA, a plan (as defined in Section 4975(e)(1) of the Code) subject to Section 4975 of the Code or an entity that is be deemed to hold the assets of any of the foregoing by virtue of such employee benefit plan's or plan's investment in such entity.

"<u>Predecessor Storm Recovery Bond</u>" means, with respect to any particular Storm Recovery Bond, every previous Storm Recovery Bond evidencing all or a portion of the same debt as that evidenced by such particular Storm Recovery Bond, and, for the purpose of this definition, any Storm Recovery Bond authenticated and delivered under <u>Section 2.06</u> of the Indenture in lieu of a mutilated, lost, destroyed or stolen Storm Recovery Bond shall be deemed to evidence the same debt as the mutilated, lost, destroyed or stolen Storm Recovery Bond.

"<u>Premises</u>" is defined in <u>Section 1(g)</u> of the Administration Agreement.

"<u>Proceeding</u>" means any suit in equity, action at law or other judicial or administrative proceeding.

"<u>Projected Unpaid Balance</u>" means, as of any Payment Date, the sum of the projected outstanding principal amount of each Tranche of Storm Recovery Bonds for such Payment Date set forth in the Expected Sinking Fund Schedule.

"<u>Protected Purchaser</u>" has the meaning specified in <u>Section 8-303</u> of the UCC.:

"<u>Public Staff</u>" means the Public Staff of the Commission, an independent agency established in N.C. Gen. Stat. § 62-15 et seq., that represents the interests of the using and consuming public in matters pending before the Commission.

"<u>Rating Agency</u>" means, with respect to any Tranche of Storm Recovery Bonds, any of Moody's or S&P that provides a rating with respect to the Storm Recovery Bonds. If no such organization (or successor) is any longer in existence, "<u>Rating Agency</u>" shall be a nationally recognized statistical rating organization or other comparable Person designated by the Issuer, notice of which designation shall be given to the Indenture Trustee and the Servicer.

"<u>Rating Agency Condition</u>" means, with respect to any action, at least ten Business Days' prior written notification to each Rating Agency of such action, and written confirmation from each of S&P and Moody's to the Servicer, the Indenture Trustee and the Issuer that such action will not result in a suspension, reduction or withdrawal of the then current rating by such Rating Agency of any Tranche of Storm Recovery Bonds and that prior to the taking of the proposed action no other Rating Agency shall have provided written notice to the Issuer that such action has resulted or would result in the suspension, reduction or withdrawal of the then current rating of the Storm Recovery Bonds; <u>provided</u>, that, if, within such ten Business Day period, any Rating Agency (other than S&P) has neither replied to such notification nor responded in a manner that indicates that such Rating Agency is reviewing and considering the notification, then (a) the Issuer shall be required to confirm that such Rating Agency has received the Rating Agency Condition request and, if it has, promptly request the related Rating Agency Condition confirmation and (b) if the Rating Agency neither replies to such notification nor responds in a manner that indicates it is reviewing and considering the notification within five Business Days following such second request, the applicable Rating Agency Condition requirement shall not be deemed to apply to such Rating Agency. For the purposes of this definition, any confirmation, request, acknowledgment or approval that is required to be in writing may be in the form of electronic mail or a press release (which may contain a general waiver of a Rating Agency's right to review or consent).

"<u>Record Date</u>" means one Business Day prior to the applicable Payment Date.

"<u>Registered Holder</u>" means the Person in whose name a Storm Recovery Bond is registered on the Storm Recovery Bond Register.

"<u>Regulation AB</u>" means the rules of the SEC promulgated under Subpart 229.1100 – Asset Backed Securities (Regulation AB), 17 C.F.R. §§229.1100-229.1123.

"<u>Reimbursable Expenses</u>" is defined with respect to the Administrator in <u>Section 2</u> of the Administration Agreement, and with respect to the Servicer, in <u>Section 6.06(a)</u> of the Servicing Agreement.

"<u>Released Parties</u>" is defined in <u>Section 6.02(d)</u> of the Servicing Agreement.

"<u>Remittance Period</u>" means, with respect to any True-Up Adjustment, the period comprised of 6 consecutive Collection Periods beginning with the Collection Period three months prior to when such True-Up Adjustment would go into effect, from the Closing Date to the first Scheduled Payment Date, and for each subsequent period between Scheduled Payment Dates.

"<u>Required Capital Level</u>" means the amount specified as such in the Series Supplement therefor.

"<u>Requirement of Law</u>" means any foreign, U.S. federal, state or local laws, statutes, regulations, rules, codes or ordinances enacted, adopted, issued or promulgated by any Governmental Authority or common law.

"<u>Responsible Officer</u>" means, with respect to: (a) the Issuer, any Manager or any duly authorized officer; (b) the Indenture Trustee, any officer within the Corporate Trust Office of such trustee (including the President, any Vice President, any Assistant Vice President, any Secretary, any Assistant Treasurer or any other officer of the Indenture Trustee customarily performing functions similar to those performed by persons who at the time shall be such officers, respectively, and that has direct responsibility for the administration of the Indenture and also, with respect to a particular matter, any other officer to whom such matter is referred to because of such officer's knowledge and familiarity with the particular subject); (c) any corporation (other than the Indenture Trustee), the Chief Executive Officer, the President, any Vice President, the Chief Financial Officer, the Treasurer, any Assistant Treasurer or any other duly authorized officer of such Person who has been authorized to act in the circumstances; (d) any partnership, any general partner thereof; and (e) any other Person (other than an individual), any duly authorized officer or member of such Person, as the context may require, who is authorized to act in matters relating to such Person.

"<u>Return on Invested Capital</u>" means, for any Payment Date with respect to any Remittance Period, the sum of (i) rate of return, payable to Duke Energy Carolinas, on its Capital Contribution equal to the rate of interest payable on the longest maturing Tranche of Storm Recovery Bonds plus (ii) any Return on Invested Capital not paid on any prior Payment Date.

"<u>S&P</u>" means Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business. References to S&P are effective so long as S&P is a Rating Agency.

"<u>Sale Agreement</u>" means the Storm Recovery Property Purchase and Sale Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Carolinas, and acknowledged and accepted by the Indenture Trustee.

"<u>Scheduled Final Payment Date</u>" means, with respect to the Storm Recovery Bonds, the date with respect to each Tranche when all interest and principal is scheduled to be paid in accordance with the Expected Sinking Fund Schedule, as specified in the Series Supplement. For the avoidance of doubt, the Scheduled Final Payment Date shall be the last Scheduled Payment Date set forth in the Expected Sinking Fund Schedule. The "last Scheduled Final Payment Date" means the Scheduled Final Payment Date of the latest maturing Tranche of Storm Recovery Bonds.

"<u>Scheduled Payment Date</u>" means, with respect to each Tranche of Storm Recovery Bonds, each Payment Date on which principal for such Tranche is to be paid in accordance with the Expected Sinking Fund Schedule for such Tranche.

"<u>SEC</u>" means the Securities and Exchange Commission.

"<u>Secretary of State</u>" means the Secretary of State of the State of Delaware or the Secretary of State of the State of North Carolina, as the case may be, or any Governmental Authority succeeding to the duties of such offices.

"<u>Secured Obligations</u>" means the payment of principal of and premium, if any, interest on, and any other amounts owing in respect of, the Storm Recovery Bonds and all fees, expenses, counsel fees and other amounts due and payable to the Indenture Trustee.

"<u>Secured Parties</u>" means the Indenture Trustee, the Holders and any credit enhancer described in a Series Supplement.

"<u>Securities Act</u>" means the Securities Act of 1933, as amended.

"<u>Securities Intermediary</u>" means U.S. Bank National Association, a national banking association, solely in the capacity of a "securities intermediary" as defined in the NY UCC and Federal Book-Entry Regulations or any successor securities intermediary under the Indenture.

"<u>Seller</u>" is defined in the preamble to the Sale Agreement.

"<u>Semi-Annual Servicer's Certificate</u>" is defined in Section 4.01(c)(ii) of the Servicing Agreement.

"<u>Semi-Annual True-Up Adjustment</u>" means each adjustment to the Storm Recovery Charges made in accordance with <u>Section 4.01(b)(i)</u> of the Servicing Agreement.

"<u>Semi-Annual True-Up Adjustment Date</u>" means the first billing cycle of [ ] and [ ] of each year, commencing in [ ], 202[ ].

"<u>Series Supplement</u>" means an indenture supplemental to the Indenture in the form attached as <u>Exhibit B</u> to the Indenture that authorizes the issuance of Storm Recovery Bonds.

"<u>Servicer</u>" means Duke Energy Carolinas, as Servicer under the Servicing Agreement.

"<u>Servicer Business Day</u>" means any day other than a Saturday, a Sunday or a day on which banking institutions in Charlotte, North Carolina or New York, New York or the Corporate Trust Office of the Indenture Trustee is authorized or obligated by law, regulation or executive order to be closed, on which the Servicer maintains normal office hours and conducts business.

"<u>Servicer Default</u>" is defined in <u>Section 7.01</u> of the Servicing Agreement.

"<u>Servicer Policies and Practices</u>" means, with respect to the Servicer's duties under <u>Exhibit A</u> to the Servicing Agreement, the policies and practices of the Servicer applicable to such duties that the Servicer follows with respect to comparable assets that it services for itself and, if applicable, others.

"<u>Servicing Agreement</u>" means the Storm Recovery Property Servicing Agreement, dated as of the date hereof, by and between the Issuer and Duke Energy Carolinas, and acknowledged and accepted by the Indenture Trustee.

"<u>Servicing Fee</u>" is defined in <u>Section 6.06(a)</u> of the Servicing Agreement.

"<u>Similar Law</u>" means any federal, state, local or other laws or regulations that are substantially similar to Title I of ERISA or Section 4975 of the Code.

"<u>Special Payment Date</u>" means the date on which, with respect to any Tranche of Storm Recovery Bonds, any payment of principal of or interest (including any interest accruing upon default) on, or any other amount in respect of, the Storm Recovery Bonds of such Tranche that is not actually paid within five days of the Payment Date applicable thereto is to be made by the Indenture Trustee to the Holders.

"<u>Special Record Date</u>" means, with respect to any Special Payment Date, the close of business on the fifteenth day (whether or not a Business Day) preceding such Special Payment Date.

"<u>Sponsor</u>" means Duke Energy Carolinas, in its capacity as "sponsor" of the Storm Recovery Bonds within the meaning of Regulation AB.

"<u>State</u>" means any one of the fifty states of the United States of America or the District of Columbia.

"<u>State Pledge</u>" means the pledge of the State of North Carolina as set forth in <u>Section 62-172(k)</u> of the Storm Recovery Law.

"<u>Storms</u>" means Hurricanes Helene, Ian and Debby.

"<u>Storm Recovery Bond Register</u>" is defined in <u>Section 2.05</u> of the Indenture.

"<u>Storm Recovery Bond Registrar</u>" is defined in <u>Section 2.05</u> of the Indenture.

"<u>Storm Recovery Bonds</u>" means the Series A Senior Secured Storm Recovery Bonds issued by the Issuer on the Closing Date.

"<u>Storm Recovery Charge Collections</u>" means Storm Recovery Charges actually received by the Servicer to be remitted to the Collection Account.

"<u>Storm Recovery Charge Payments</u>" means the payments made by Customers based on the Storm Recovery Charges.

"<u>Storm Recovery Charge</u>" means any storm-recovery charges as defined in Section 62-172(a)(15) of the Storm Recovery Law that are authorized by the Financing Order.

"<u>Storm Recovery Collateral</u>" or "<u>Collateral</u>" is defined in the preamble of the Indenture.

"<u>Storm Recovery Costs</u>" means (i) Duke Energy Carolinas's deferred asset balance associated with the Storms, including a return on the unrecovered balance, and with respect to the capital investments, including a deferral of depreciation expense and a return on the investment determined by the Commission to be prudently incurred in Docket No. E-7, Sub 1321 plus (ii) carrying costs through the projected issuances date of the Storm Recovery Bonds, calculated at a rate authorized by the Commission, (iii) plus up-front Financing Costs.

"<u>Storm Recovery Law</u>" means the laws of the State of North Carolina adopted in 2019 enacted as <u>Section 62-172,</u> North Carolina Statutes.

"<u>Storm Recovery Property</u>" means all storm recovery property as defined in Section 62-172(a)(17)a. of the Storm Recovery Law created pursuant to the Financing Order and under the Storm Recovery Law, including the right to impose, bill, charge, collect and receive the Storm Recovery Charges authorized under the Financing Order and to obtain periodic adjustments of the Storm Recovery Charges and all revenue, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in <u>Section 62-172(a)(17)b.</u> of the Storm Recovery Law, regardless of whether such revenues, collections, claims, rights to payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money or proceeds.

"<u>Storm Recovery Property Records</u>" is defined in <u>Section 5.01</u> of the Servicing Agreement.

"<u>Storm Recovery Rate Class</u>" means one of the four separate rate classes to whom Charges are allocated for ratemaking purposes in accordance with the Financing Order.

"<u>Storm Recovery Rate Schedule</u>" means the Tariff sheets to be filed with the Commission stating the amounts of the Charges, as such Tariff sheets may be amended or modified from time to time pursuant to a True-Up Adjustment.

"<u>Subaccounts</u>" is defined in <u>Section 8.02(a)</u> of the Indenture.

"<u>Successor</u>" means any successor to Duke Energy Carolinas under the Storm Recovery Law, whether pursuant to any bankruptcy, reorganization or other insolvency proceeding or pursuant to any merger, conversion, acquisition, sale or transfer, by operation of law, as a result of electric utility restructuring, or otherwise.

"<u>Successor Servicer</u>" is defined in <u>Section 3.07(e)</u> of the Indenture.

"<u>Tariff</u>" means the most current version on file with the Commission.

"<u>Tax Returns</u>" is defined in <u>Section 1(a)(iii)</u> of the Administration Agreement.

"<u>Temporary Storm Recovery Bonds</u>" means Storm Recovery Bonds executed and, upon the receipt of an Issuer Order, authenticated and delivered by the Indenture Trustee pending the preparation of Definitive Storm Recovery Bonds pursuant to <u>Section 2.04</u> of the Indenture.

"<u>Termination Notice</u>" is defined in <u>Section 7.01</u> of the Servicing Agreement.

"<u>TPS</u>" means a third party supplier which is authorized by law to sell electric service to a customer using the transmission or distribution system of Duke Energy Carolinas.

"<u>Tranche</u>" means any of the tranches of Storm Recovery Bonds.

"<u>Tranche Maturity Date</u>" means, with respect to any Tranche of Storm Recovery Bonds, the maturity date therefor, as specified in the Series Supplement therefor.

"<u>Treasury</u>" means the U.S. Department of the Treasury.

"<u>True-Up Adjustment</u>" means any Semi-Annual True-Up Adjustment or Interim True-Up Adjustment, as the case may be.

"<u>Trust Indenture Act</u>" means the Trust Indenture Act of 1939 as in force on the Closing Date, unless otherwise specifically provided.

"<u>UCC</u>" or "<u>Uniform Commercial Code</u>" means the Uniform Commercial Code as in effect in the relevant jurisdiction.

"<u>Underwriters</u>" means the underwriters who purchase Storm Recovery Bonds from the Issuer and sell such Storm Recovery Bonds in a public offering.

"<u>Underwriting Agreement</u>" means the Underwriting Agreement, dated [ ], 2025, by and among the Issuer, Duke Energy Carolinas, and the representatives of the several Underwriters named therein, as the same may be amended, supplemented or modified from time to time, with respect to the issuance of the Storm Recovery Bonds.

"<u>U.S. Government Obligations</u>" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and that are not callable at the option of the issuer thereof.

"<u>Weighted Average Days Outstanding</u>" or "<u>WADO</u>" means the weighted average number of days Duke Energy Carolinas monthly bills to Customers remain outstanding during the calendar year preceding the calculation thereof pursuant to <u>Section 4.01(b)(i)</u> of the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. <u>Rules of Construction</u>. Unless the context otherwise requires, in each Basic Document to which this <u>Appendix A</u> is attached:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) All accounting terms not specifically defined herein shall be construed in accordance with United States generally accepted accounting principles. To the extent that the definitions of accounting terms in any Basic Document are inconsistent with the meanings of such terms under generally accepted accounting principles or regulatory accounting principles, the definitions contained in such Basic Document shall control.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The term "<u>including</u>" means "including without limitation", and other forms of the verb "<u>include</u>" have correlative meanings.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) All references to any Person shall include such Person's permitted successors and assigns, and any reference to a Person in a particular capacity excludes such Person in other capacities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Unless otherwise stated in any of the Basic Documents, in the computation of a period of time from a specified date to a later specified date, the word "from" means "from and including" and each of the words "to" and "until" means "to but excluding".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The words "hereof", "herein" and "hereunder" and words of similar import when used in any Basic Document shall refer to such Basic Document as a whole and not to any particular provision of such Basic Document. References to Articles, Sections, Appendices and Exhibits in any Basic Document are references to Articles, Sections, Appendices and Exhibits in or to such Basic Document unless otherwise specified in such Basic Document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The various captions (including the tables of contents) in each Basic Document are provided solely for convenience of reference and shall not affect the meaning or interpretation of any Basic Document.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The definitions contained in this <u>Appendix A</u> apply equally to the singular and plural forms of such terms, and words of the masculine, feminine or neuter gender shall mean and include the correlative words of other genders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Unless otherwise specified, references to an agreement or other document include references to such agreement or document as from time to time amended, restated, reformed, supplemented or otherwise modified in accordance with the terms thereof (subject to any restrictions on such amendments, restatements, reformations, supplements or modifications set forth in such agreement or document) and include any attachments thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) References to any law, rule, regulation or order of a Governmental Authority shall include such law, rule, regulation or order as from time to time in effect, including any amendment, modification, codification, replacement or reenactment thereof or any substitution therefor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) The word "will" shall be construed to have the same meaning and effect as the word "shall".

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) The word "or" is not exclusive.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) All terms defined in the relevant Basic Document to which this <u>Appendix A</u> is attached shall have the defined meanings when used in any certificate or other document made or delivered pursuant thereto unless otherwise defined therein.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) A term has the meaning assigned to it.

## Exhibit 10.1

**Exhibit 10.1** 

**STORM RECOVERY PROPERTY SERVICING AGREEMENT**

**by and between**

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, Issuer**

**and**

**DUKE ENERGY CAROLINAS, LLC, Servicer**

**Acknowledged and Accepted by**

**U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee**

**Dated as of [Closing Date], 2025**

<u>**TABLE OF CONTENTS**</u>

<u>Page</u> <br>ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION 4

<br> Section 1.01. Definitions and Rules of Construction 4

<br> ARTICLE II APPOINTMENT AND AUTHORIZATION 4

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2.01. | Appointment of Servicer; Acceptance of Appointment | 4.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2.02. | Authorization | 4.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 2.03. | Dominion and Control Over the Storm Recovery Property | 4.0 |

---

<br> ARTICLE III ROLE OF SERVICER 5

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3.01. | Duties of Servicer | 5.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3.02. | Servicing and Maintenance Standards | 8.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3.03. | Annual Reports on Compliance with Regulation AB | 8.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 3.04. | Annual Report by Independent Registered Public Accountants | 9.0 |

---

<br> ARTICLE IV SERVICES RELATED TO TRUE-UP ADJUSTMENTS 10

<br> Section 4.01. True-Up Adjustments 10 <br> Section 4.02. Limitation of Liability 13

<br> ARTICLE V THE STORM RECOVERY PROPERTY 13

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5.01. | Custody of Storm Recovery Property Records | 13.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5.02. | Duties of Servicer as Custodian | 14.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5.03. | Custodian's Indemnification | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5.04. | Effective Period and Termination | 15.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 5.05. | Third-Party Suppliers | 16.0 |

---

ARTICLE VI THE SERVICER 16

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.01. | Representations and Warranties of Servicer | 16.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.02. | Indemnities of Servicer; Release of Claims | 18.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.03. | Binding Effect of Servicing Obligations | 20.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.04. | Limitation on Liability of Servicer and Others | 21.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.05. | Duke Energy Carolinas Not to Resign as Servicer | 22.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.06. | Servicing Compensation | 22.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.07. | Compliance with Applicable Law | 23.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.08. | Access to Certain Records and Information Regarding Storm Recovery Property | 24.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.09. | Appointments | 24.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.10. | No Servicer Advances | 24.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.11. | Remittances | 24.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 6.12. | Maintenance of Operations | 25.0 |

---

<br> ARTICLE VII DEFAULT 25

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7.01. | Servicer Default | 25.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7.02. | Appointment of Successor | 27.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7.03. | Waiver of Past Defaults | 28.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7.04. | Notice of Servicer Default | 28.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 7.05. | Cooperation with Successor | 28.0 |

---

<br> ARTICLE VIII MISCELLANEOUS PROVISIONS 28

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.01. | Amendment | 28.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.02. | Maintenance of Accounts and Records | 30.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.03. | Notices | 30.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.04. | Assignment | 31.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.05. | Limitations on Rights of Others | 31.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.06. | Severability | 31.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.07. | Separate Counterparts | 31.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.08. | Governing Law | 31.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.09. | Assignment to Indenture Trustee | 32.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.10. | Nonpetition Covenants | 32.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.11. | Limitation of Liability | 32.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.12. | Rule 17g-5 Compliance | 32.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.13. | Indenture Trustee Actions | 32.0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Section 8.14. | Waiver of Jury Trial | 32.0 |

---

**<u>EXHIBITS</u>**

---

| | |
|:---|:---|
| Exhibit A | Servicing Procedures |
| Exhibit B | Form of Monthly Servicer's Certificate |
| Exhibit C | Form of Semi-Annual Servicer's Certificate |
| Exhibit D | Form of Servicer Certificate |
| Exhibit E | Form of Certificate of Compliance |
| Exhibit F | Expected Sinking Fund Schedule |

---

This STORM RECOVERY PROPERTY SERVICING AGREEMENT, dated as of [Closing Date], 2025, is by and between DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, a Delaware limited liability company, as <u>Issuer</u>, and DUKE ENERGY CAROLINAS, LLC, a North Carolina limited liability company, as Servicer, and acknowledged and accepted by U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as <u>Indenture Trustee</u>.

RECITALS

WHEREAS, pursuant to the Storm Recovery Law and the Financing Order, Duke Energy Carolinas, in its capacity as seller (the "Seller"), and the Issuer are concurrently entering into the Sale Agreement pursuant to which the Seller is selling and the Issuer is purchasing certain Storm Recovery Property created pursuant to the Storm Recovery Law and the Financing Order described therein;

WHEREAS, in connection with its ownership of the Storm Recovery Property relating to the Storm Recovery Bonds and in order to collect the associated Storm Recovery Charges, the Issuer desires to engage the Servicer to carry out the functions described herein and the Servicer desires to be so engaged;

WHEREAS, the Issuer desires to engage the Servicer to act on its behalf in obtaining True-Up Adjustments from the Commission and the Servicer desires to be so engaged;

WHEREAS, the Storm Recovery Charge Collections initially may be commingled with other funds collected by the Servicer; and

WHEREAS, certain parties may have an interest in such commingled collections, and such parties will have entered into the Intercreditor Agreements, which allows Duke Energy Carolinas to allocate the collected, commingled funds according to each party's interest;

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

**ARTICLE I<br> DEFINITIONS AND RULES OF CONSTRUCTION**

Section 1.01. <u>Definitions and Rules of Construction</u>. Capitalized terms used but not otherwise defined in this Servicing Agreement shall have the respective meanings given to such terms in <u>Appendix A</u> of the Indenture, which is hereby incorporated by reference into this Servicing Agreement as if set forth fully in this Servicing Agreement. Not all terms defined in <u>Appendix A</u> are used in this Servicing Agreement. The rules of construction set forth in <u>Appendix A</u> shall apply to this Servicing Agreement and are hereby incorporated by reference into this Servicing Agreement as if set forth fully in this Servicing Agreement, however for purposes of this Servicing Agreement, unless otherwise indicated herein, the terms Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property mean the Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property for the Storm Recovery Bonds.

**ARTICLE II<br> APPOINTMENT AND AUTHORIZATION**

Section 2.01. <u>Appointment of Servicer; Acceptance of Appointment</u>. The Issuer hereby appoints the Servicer, as an independent contractor, and the Servicer hereby accepts such appointment, to perform the Servicer's obligations pursuant to this Servicing Agreement on behalf of and for the benefit of the Issuer or any assignee thereof in accordance with the terms of this Servicing Agreement and applicable law as it applies to the Servicer in its capacity as servicer hereunder. This appointment and the Servicer's acceptance thereof may not be revoked except in accordance with the express terms of this Servicing Agreement.

Section 2.03. <u>Dominion and Control Over the Storm Recovery Property</u>. Notwithstanding any other provision herein, the Issuer shall have dominion and control over the Storm Recovery Property, and the Servicer, in accordance with the terms hereof, is acting solely as the servicing agent and custodian for the Issuer with respect to the Storm Recovery Property and the Storm Recovery Property Records for the Storm Recovery Bonds. The Servicer shall not take any action that is not authorized by this Servicing Agreement or the Financing Order, that is not consistent with its customary procedures and practices or that shall impair the rights of the Issuer or the Indenture Trustee (on behalf of the Holders) in the Storm Recovery Property, in each case unless such action is required by applicable law or court or regulatory order.

**ARTICLE III<br> ROLE OF SERVICER**

Section 3.01. <u>Duties of Servicer</u>. The Servicer, as agent for the Issuer, shall have the following duties:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Duties of Servicer Generally</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Servicer's duties in general shall include: management, servicing and administration of the Storm Recovery Property; calculating consumption, billing the Storm Recovery Charges, collecting the Storm Recovery Charges from Customers and posting all collections; responding to inquiries by Customers, the Commission or any other Governmental Authority with respect to the Storm Recovery Property or Storm Recovery Charges; investigating and handling delinquencies (and furnishing reports with respect to such delinquencies to the Issuer); processing and depositing collections and making periodic remittances; furnishing periodic and current reports to the Issuer, the Commission, the Indenture Trustee and the Rating Agencies; making all filings with the Commission and taking such other action as may be necessary to perfect the Issuer's ownership interests in and the Indenture Trustee's Lien on the Storm Recovery Property; making all filings and taking such other action as may be necessary to perfect and maintain the perfection and priority of the Indenture Trustee's Lien on all Storm Recovery Collateral; selling as the agent for the Issuer, as its interests may appear, defaulted or written off accounts in accordance with the Servicer's usual and customary practices; taking all necessary action in connection with True-Up Adjustments as set forth herein; and performing such other duties as may be specified under the Financing Order to be performed by it. Anything to the contrary notwithstanding, the duties of the Servicer set forth in this Servicing Agreement shall be qualified in their entirety by any Commission Regulations, the Financing Order and the U.S. federal securities laws and the rules and regulations promulgated thereunder, including without limitation, Regulation AB, as in effect at the time such duties are to be performed. Without limiting the generality of this <u>Section 3.01(a)(i)</u>, in furtherance of the foregoing, the Servicer hereby agrees that it shall also have, and shall comply with, the duties and responsibilities relating to data acquisition, consumption and bill calculation, billing, customer service functions, collections, posting, payment processing and remittance set forth in <u>Exhibit A</u>. Any processing and depositing of collections, making of periodic remittances and furnishing of periodic reports set forth in this <u>Section 3.01(a)(i)</u> shall be subject to the provisions of the Intercreditor Agreements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Reporting Functions</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Monthly Servicer's Certificate</u>. On or before the last Servicer Business Day of each month, the Servicer shall prepare and deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies a written report substantially in the form of <u>Exhibit B</u> (a "<u>Monthly Servicer's Certificate</u>") setting forth certain information relating to Storm Recovery Charge Payments in connection with the Storm Recovery Charges received by the Servicer during the completed Collection Period preceding such date; provided, however, that, for any month in which the Servicer is required to deliver a Semi-Annual Servicer's Certificate pursuant to <u>Section 4.01(c)(ii)</u>, the Servicer shall prepare and deliver the Monthly Servicer's Certificate no later than the date of delivery of such Semi-Annual Servicer's Certificate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Notification of Laws and Regulations</u>. The Servicer shall immediately notify the Issuer, the Indenture Trustee, and the Rating Agencies in writing of any Requirement of Law or Commission Regulations hereafter promulgated that have a material adverse effect on the Servicer's ability to perform its duties under this Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <u>Other Information</u>. Upon the reasonable request of the Issuer, the Commission or any Rating Agency, the Servicer shall provide to the Issuer, the Commission or such Rating Agency, as the case may be, any public financial information in respect of the Servicer, or any material information regarding the Storm Recovery Property to the extent it is reasonably available to the Servicer, as may be reasonably necessary and permitted by law to enable the Issuer, the Commission or the Rating Agencies to monitor the performance by the Servicer hereunder; provided however, that any such request by the Indenture Trustee shall not create any obligation for the Indenture Trustee to monitor the performance of the Servicer. In addition, so long as any of the Storm Recovery Bonds are outstanding, the Servicer shall provide the Issuer, the Commission and the Indenture Trustee within a reasonable time after written request therefor, any information available to the Servicer or reasonably obtainable by it that is necessary to calculate the Storm Recovery Charges applicable to each Storm Recovery Rate Class.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) <u>Preparation of Reports</u>. The Servicer shall prepare and deliver such additional reports as required under this Servicing Agreement, including a copy of each Semi-Annual Servicer's Certificate described in <u>Section 4.01(c)(ii)</u>, the annual Certificate of Compliance described in <u>Section 3.03</u> and the Annual Accountant's Report described in <u>Section 3.04</u>. In addition, the Servicer shall prepare, procure, deliver and/or file, or cause to be prepared, procured, delivered or filed, any reports, attestations, exhibits, certificates or other documents required to be delivered or filed with the SEC (and/or any other Governmental Authority) by the Issuer or the Depositor under the U.S. federal securities or other applicable laws or in accordance with the Basic Documents, including but without limiting the generality of foregoing, filing with the SEC, if applicable and required by applicable law, a copy or copies of (A) the Monthly Servicer's Certificates described in <u>Section 3.01(b)(i)</u> (under Form 10-D or any other applicable form), (B) the Semi-Annual Servicer's Certificates described in <u>Section 4.01(c)(ii)</u> (under Form 10-D or any other applicable form), (C) the annual statements of compliance, attestation reports and other certificates described in <u>Section 3.03</u> and (D) the Annual Accountant's Report (and any attestation required under Regulation AB) described in <u>Section 3.04</u>. In addition, the appropriate officer or officers of the Servicer shall (in its separate capacity as Servicer) sign the Depositor's annual report on Form 10-K (and any other applicable SEC or other reports, attestations, certifications and other documents), to the extent that the Servicer's signature is required by, and consistent with, the U.S. federal securities laws and/or any other applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Opinions of Counsel</u>. The Servicer shall obtain on behalf of the Issuer and deliver to the Issuer and the Indenture Trustee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) promptly after the execution and delivery of this Servicing Agreement and of each amendment hereto, an Opinion of Counsel from external counsel of the Issuer either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Secretary of State of the State of North Carolina, the Secretary of State of the State of Delaware and all filings pursuant to the UCC, that are necessary under the UCC and the Storm Recovery Law to perfect or maintain, as applicable, the Liens of the Indenture Trustee in the Storm Recovery Property have been authorized, executed and filed, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) within ninety (90) days after the beginning of each calendar year beginning with the first calendar year beginning more than three months after the date hereof, an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Servicer, or from external counsel of the Issuer, dated as of a date during such 90-day period, either (A) to the effect that, in the opinion of such counsel, all filings, including filings with the Secretary of State of the State of North Carolina, the Secretary of State of the State of Delaware and all filings pursuant to the UCC, have been authorized, executed and filed that are necessary under the UCC and the Storm Recovery Law to maintain the Liens of the Indenture Trustee in the Storm Recovery Property, and reciting the details of such filings or referring to prior Opinions of Counsel in which such details are given, or (B) to the effect that, in the opinion of such counsel, no such action shall be necessary to preserve, protect and perfect such Liens. Such Opinion of Counsel shall also describe any action required within the 12-month period following the date of such opinion to maintain the Lien and the perfected security interest by the Indenture.

Each Opinion of Counsel referred to in <u>Section 3.01(c)(i)</u> or <u>Section 3.01(c)(ii)</u> above shall specify any action necessary (as of the date of such opinion) to be taken in the following year to perfect or maintain, as applicable, such interest or Lien.

Section 3.02. <u>Servicing and Maintenance Standards</u>. The Servicer will monitor payments and impose collection policies on Customers, as permitted under the Financing Order and the Commission Regulations. On behalf of the Issuer, the Servicer shall: (a) manage, service, administer, bill, charge, collect, receive and post collections in respect of the Storm Recovery Property with reasonable care and in material compliance with each applicable Requirement of Law, including all applicable Commission Regulations and guidelines, using the same degree of care and diligence that the Servicer exercises with respect to similar assets for its own account and, if applicable, for others; (b) calculate Storm Recovery Charges in accordance with the Storm Recovery Law; (c) follow standards, policies and procedures in performing its duties as Servicer that are customary in the electric distribution industry; (d) use all reasonable efforts, consistent with its customary servicing procedures, to enforce, and maintain rights in respect of, the Storm Recovery Property and to impose, bill, charge, collect, receive and post the Storm Recovery Charges; (e) comply with each Requirement of Law, including all applicable Commission Regulations and guidelines, applicable to and binding on it relating to the Storm Recovery Property; (f) file all reports with the Commission required by the Financing Order; (g) file and maintain the effectiveness of UCC financing statements filed with the Secretary of State of the State of North Carolina with respect to the property transferred under the Sale Agreement; and (h) take such other action on behalf of the Issuer to ensure that the Lien of the Indenture Trustee on the Storm Recovery Collateral remains perfected and of first priority, including any action required pursuant to any Intercreditor Agreement. The Servicer shall follow such customary and usual practices and procedures as it shall deem necessary or advisable in its servicing of all or any portion of the Storm Recovery Property, which, in the Servicer's judgment, may include the taking of legal action, at the Issuer's expense but subject to the priority of payments set forth in Section 8.02(e) of the Indenture.

Section 3.03. <u>Annual Reports on Compliance with Regulation AB.</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, on or before the earlier of (a) March 31 of each year, beginning March 31, 202[ ] or (b) with respect to each calendar year during which the Depositor's annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, certificates from a Responsible Officer of the Servicer (i) containing, and certifying as to, the statements of compliance required by Item 1123 (or any successor or similar items or rule) of Regulation AB, as then in effect, and (ii) containing, and certifying as to, the statements and assessment of compliance required by Item 1122(a) (or any successor or similar items or rule) of Regulation AB, as then in effect. These certificates may be in the form of, or shall include the forms attached as <u>Exhibit D</u> and <u>Exhibit E</u>, with, in the case of <u>Exhibit D</u>, such changes as may be required to conform to the applicable securities law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer shall use commercially reasonable efforts to obtain, from each other party participating in the servicing function, any additional certifications as to the statements and assessment required under Item 1122 (or any successor or similar items or rule) or Item 1123 of Regulation AB to the extent required in connection with the filing of the annual report on Form 10-K; provided, however, that a failure to obtain such certifications shall not be a breach of the Servicer's duties hereunder. The parties acknowledge that the Indenture Trustee's certifications shall be limited to the Item 1122 certifications described in Exhibit C of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The initial Servicer, in its capacity as Depositor, shall post on its or its parent company's website and file with or furnish to the SEC, in periodic reports and other reports as are required from time to time under Section 13 or Section 15(d) of the Exchange Act, the information described in Section 3.07(g) of the Indenture to the extent such information is reasonably available to the Depositor.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except to the extent permitted by applicable law, the Issuer, shall not voluntarily suspend or terminate its filing obligations as issuing entity with the SEC as described in <u>Section 3.03(c)</u>.

Section 3.04. <u>Annual Report by Independent Registered Public Accountants</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer, at its own expense in partial consideration of the Servicing Fee paid to it, shall cause a firm of Independent registered public accountants (which may provide other services to the Servicer or the Seller) to prepare annually, and the Servicer shall deliver annually to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies on or before the earlier of (i) March 31 of each year, beginning March 31, 202[ ], or (ii) with respect to each calendar year during which the Issuer's annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, the date on which such annual report on Form 10-K is required to be filed in accordance with the Exchange Act and the rules and regulations thereunder, a report (the "<u>Annual Accountant's Report</u>") regarding the Servicer's assessment of compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB during the immediately preceding twelve (12) months ended December 31 (or, in the case of the first Annual Accountant's Report to be delivered on or before March 31, 202[ ], the period of time from the date of this Agreement until December 31, 202[ ]), in accordance with paragraph (b) of Rule 13a-18 and Rule 15d-18 of the Exchange Act and Item 1122 of Regulation AB. Such report shall be signed by an authorized officer of the Servicer and shall at a minimum address each of the servicing criteria specified in Exhibit D-1. In the event that the accounting firm providing such report requires the Indenture Trustee to agree or consent to the procedures performed by such firm, the Issuer shall direct the Indenture Trustee in writing to so agree; it being understood and agreed that the Indenture Trustee will deliver such letter of agreement or consent in conclusive reliance upon the direction of the Issuer, and the Indenture Trustee will not make any independent inquiry or investigation as to, and shall have no obligation or liability in respect of the sufficiency, validity or correctness of such procedures.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Annual Accountant's Report delivered pursuant to <u>Section 3.04(a)</u> shall also indicate that the accounting firm providing such report is independent of the Servicer in accordance with the rules of the Public Company Accounting Oversight Board and shall include any attestation report required under Item 1122(b) of Regulation AB, as then in effect. The costs of the Annual Accountant's Report shall be reimbursable as an Operating Expense under the Indenture.

**ARTICLE IV<br> SERVICES RELATED TO TRUE-UP ADJUSTMENTS**

Section 4.01. <u>True-Up Adjustments</u>. From time to time, until the Collection in Full of the Charges for the Storm Recovery Bonds, the Servicer shall identify the need for Semi-Annual True-Up Adjustments, and Interim True-Up Adjustments and shall take all reasonable action to obtain and implement such True-Up Adjustments, all in accordance with the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Expected Sinking Fund Schedule</u>. The Expected Sinking Fund Schedule for the Storm Recovery Bonds is attached hereto as <u>Exhibit F</u>. If the Expected Sinking Fund Schedule is revised, the Servicer shall send a copy of such revised Expected Sinking Fund Schedule to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies promptly thereafter.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>True-Up Adjustments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Semi-Annual True-Up Adjustments and Filings</u>. At the beginning of Duke Energy Carolinas's billing cycle for [ ] and [ ], and at least every three months beginning twelve months prior to the Scheduled Final Payment Date for the latest maturing tranche of the Storm Recovery Bonds, the Servicer shall: (A) update the data and assumptions underlying the calculation of the Storm Recovery Charges, including projected electricity consumption during the next two Remittance Periods for each Storm Recovery Rate Class and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the Weighted Average Days Outstanding and write-offs; (B) determine the Periodic Payment Requirements and Periodic Billing Requirement for the next two Remittance Periods based on such updated data and assumptions; (C) determine the Storm Recovery Charges to be allocated to each Storm Recovery Rate Class during the next two Remittance Periods based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and any other tariffs filed pursuant thereto; (D) make all required public notices and other filings with the Commission to reflect the revised Storm Recovery Charges, including any Amendatory Schedule; and (E) take all reasonable actions and make all reasonable efforts to effect such Semi-Annual True-Up Adjustment and to enforce the provisions of the Storm Recovery Law and the Financing Order; provided, that, in the case of any Semi-Annual True-Up Adjustment following the Scheduled Final Payment Date for the latest maturing tranche of the Storm Recovery Bonds, the Semi-Annual True-Up Adjustment will be calculated to ensure that the Storm Recovery Charges are sufficient to pay the Storm Recovery Bonds in full on the next Payment Date. The Servicer shall implement the revised Storm Recovery Charges, if any, resulting from such Semi-Annual True-Up Adjustment as of the Semi-Annual True-Up Adjustment Date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Interim True-Up Adjustments and Filings</u>. No later than 60 days prior to the first day of the applicable monthly billing cycle, the Servicer shall: (A) update the data and assumptions underlying the calculation of the Storm Recovery Charges, including projected electricity consumption during the next two Remittance Periods for each Storm Recovery Rate Class and including Periodic Principal, interest and estimated expenses and fees of the Issuer to be paid during such period, the rate of delinquencies and write-offs; (B) determine the Periodic Payment Requirement and Periodic Billing Requirement for the next two Remittance Periods based on such updated data and assumptions; and (C) based upon such updated data and requirements, project whether existing and projected Storm Recovery Charge Collections together with available fund balances in the Excess Funds Subaccount, will be sufficient (x) to make on a timely basis all scheduled payments of Periodic Principal and interest in respect of each Outstanding tranche of Storm Recovery Bonds during such Remittance Period, (y) to pay other On-going Financing Costs on a timely basis and (z) to maintain the Capital Subaccount at the Required Capital Level. If the Servicer determines that Storm Recovery Charges will not be sufficient for such purposes, the Servicer shall, no later than the date described in the first sentence of this <u>Section 4.01(b)(ii)</u>: (1) determine the Storm Recovery Charges to be allocated to each Storm Recovery Rate Class during the next two Remittance Period based on such Periodic Billing Requirement and the terms of the Financing Order, the Tariff and other tariffs filed pursuant thereto; (2) make all required public notices and other filings with the Commission to reflect the revised Storm Recovery Charges, including any Amendatory Schedule; and (3) take all reasonable actions and make all reasonable efforts to effect such Interim True-Up Adjustment and to enforce the provisions of the Storm Recovery Law and the Financing Order. However, the Storm Recovery Charges will be consolidated with any subsequently approved storm recovery charges to display one total charge on the Customer's bill.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Reports</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Notification of Amendatory Schedule Filings and True-Up Adjustments</u>. Whenever the Servicer files an Amendatory Schedule with the Commission or implements revised Storm Recovery Charges with notice to the Commission without filing an Amendatory Schedule, the Servicer shall send a copy of such filing or notice (together with a copy of all notices and documents that, in the Servicer's reasonable judgment, are material to the adjustments effected by such Amendatory Schedule or notice) to the Issuer, the Indenture Trustee and the Rating Agencies concurrently therewith. If, for any reason any revised Storm Recovery Charges are not implemented and effective on the applicable date set forth herein, the Servicer shall notify the Issuer, the Indenture Trustee and each Rating Agency by the end of the second Servicer Business Day after such applicable date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) <u>Semi-Annual Servicer's Certificate</u>. Not later than five (5) Servicer Business Days prior to each Payment Date or Special Payment Date, the Servicer shall deliver a written report substantially in the form of <u>Exhibit C</u> (the "<u>Semi-Annual Servicer's Certificate</u>") to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, which shall include all of the following information (to the extent applicable and including any other information so specified in the Series Supplement) as to the Storm Recovery Bonds with respect to such Payment Date or Special Payment Date or the period since the previous Payment Date, as applicable:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) the amount of the payment to Holders allocable to principal, if any;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) the amount of the payment to Holders allocable to interest;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) the aggregate Outstanding Amount of the Storm Recovery Bonds, before and after giving effect to any payments allocated to principal reported under <u>Section 4.01(c)(ii)(A)</u>;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) the difference, if any, between the amount specified in <u>Section 4.01(c)(ii)(C)</u> and the Outstanding Amount specified in the Expected Sinking Fund Schedule;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(E) any other transfers and payments to be made on such Payment Date or Special Payment Date, including amounts paid to the Indenture Trustee and to the Servicer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(F) the amounts on deposit in the Capital Subaccount and the Excess Funds Subaccount, after giving effect to the foregoing payments.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) <u>Reports to Customers</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) After each revised Storm Recovery Charge has gone into effect pursuant to a True-Up Adjustment, the Servicer shall, to the extent and in the manner and time frame required by any applicable Commission Regulations cause to be prepared and delivered to Customers any required notices announcing such revised Storm Recovery Charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) The Servicer shall comply with the requirements of the Financing Order with respect to the filing of the Storm Recovery Rate Schedule to ensure that the Storm Recovery Charges are separate and apart from the Servicer's other charges (which may be consolidated with other storm recovery charges) and appear as a separate line item on the Bills sent to Customers.

Section 4.02. <u>Limitation of Liability</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Issuer and the Servicer expressly agree and acknowledge that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) In connection with any True-Up Adjustment, the Servicer is acting solely in its capacity as the servicing agent hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) None of the Servicer, the Issuer or the Indenture Trustee is responsible in any manner for, and shall have no liability whatsoever as a result of, any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer's failure to make any filings required by <u>Section 4.01</u> in a timely and correct manner or any breach by the Servicer of its duties under this Servicing Agreement that adversely affects the Storm Recovery Property or the True-Up Adjustments), by the Commission in any way related to the Storm Recovery Property or in connection with any True-Up Adjustment, the subject of any filings under <u>Section 4.01</u>, any proposed True-Up Adjustment or the approval of any revised Storm Recovery Charges and the scheduled adjustments thereto.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) Except to the extent that the Servicer is liable under <u>Section 6.02</u>, the Servicer shall have no liability whatsoever relating to the calculation of any revised Storm Recovery Charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculation regarding expected energy consumption volume and the Weighted Average Days Outstanding, write-offs and estimated expenses and fees of the Issuer so long as the Servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any Person, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Storm Recovery Bond.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding the foregoing, this <u>Section 4.02</u> shall not relieve the Servicer of liability for any misrepresentation by the Servicer under <u>Section 6.01</u> or for any breach by the Servicer of its other obligations under this Servicing Agreement.

**ARTICLE V<br> THE STORM RECOVERY PROPERTY**

Section 5.01. <u>Custody of Storm Recovery Property Records</u>. To assure uniform quality in servicing the Storm Recovery Property and to reduce administrative costs, the Issuer hereby revocably appoints the Servicer, and the Servicer hereby accepts such appointment, to act as the agent of the Issuer as custodian of any and all documents and records that the Seller shall keep on file, in accordance with its customary procedures, relating to the Storm Recovery Property, including copies of the Financing Order and Amendatory Schedules relating thereto and all documents filed with the Commission in connection with any True-Up Adjustment and computational records relating thereto (collectively for the Storm Recovery Bonds, the "<u>Storm Recovery Property Records</u>"), which are hereby constructively delivered to the Indenture Trustee, as pledgee of the Issuer with respect to all Storm Recovery Property.

Section 5.02. <u>Duties of Servicer as Custodian</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Safekeeping</u>. The Servicer shall hold the Storm Recovery Property Records on behalf of the Issuer and the Indenture Trustee and maintain such accurate and complete accounts, records and computer systems pertaining to the Storm Recovery Property Records as shall enable the Issuer and the Indenture Trustee, as applicable, to comply with this Servicing Agreement, the Sale Agreement and the Indenture. In performing its duties as custodian, the Servicer shall act with reasonable care, using that degree of care and diligence that the Servicer exercises with respect to comparable assets that the Servicer services for itself or, if applicable, for others. The Servicer shall promptly report to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies any failure on its part to hold the Storm Recovery Property Records and maintain its accounts, records and computer systems as herein provided and promptly take appropriate action to remedy any such failure. Nothing herein shall be deemed to require an initial review or any periodic review by the Issuer or the Indenture Trustee of the Storm Recovery Property Records. The Servicer's duties to hold the Storm Recovery Property Records set forth in this <u>Section 5.02</u>, to the extent the Storm Recovery Property Records have not been previously transferred to a Successor Servicer pursuant to <u>ARTICLE VII</u>, shall terminate one year and one day after the earlier of (i) the date on which the Servicer is succeeded by a Successor Servicer in accordance with <u>ARTICLE VII</u> and (ii) the first date on which no Storm Recovery Bonds are Outstanding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Maintenance of and Access to Records</u>. The Servicer shall maintain the Storm Recovery Property Records at 410 South Wilmington Street, Raleigh, North Carolina 27601-1748 or at its facility located at Iron Mountain, 3125 Parkside Drive, Charlotte, North Carolina 28208, or at such other office as shall be specified to the Issuer, the Commission, Public Staff and the Indenture Trustee by written notice at least 30 days prior to any change in location. The Servicer shall make available for inspection, audit and copying to the Issuer, the Commission, the Public Staff and the Indenture Trustee or their respective duly authorized representatives, attorneys or auditors the Storm Recovery Property Records at such times during normal business hours as the Issuer, the Commission, the Public Staff or the Indenture Trustee shall reasonably request and that do not unreasonably interfere with the Servicer's normal operations. Nothing in this <u>Section 5.02(b)</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section 5.02(b)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Release of Documents</u>. Upon instruction from the Indenture Trustee in accordance with the Indenture, the Servicer shall release any Storm Recovery Property Records to the Indenture Trustee, the Indenture Trustee's agent or the Indenture Trustee's designee, as the case may be, at such place or places as the Indenture Trustee may designate, as soon as practicable. Nothing in this <u>Section 5.02(c)</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section 5.02(c)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Defending Storm Recovery Property Against Claims</u>. To the extent not undertaken by the Seller pursuant to Section 4.08 of the Sale Agreement, the Servicer shall negotiate for the retention of legal counsel and such other experts as may be needed to institute and maintain any action or proceeding, on behalf of and in the name of the Issuer, necessary to compel performance by the Commission or the State of North Carolina of any of their obligations or duties under the Storm Recovery Law and the Financing Order, and the Servicer agrees to assist the Issuer and its legal counsel in taking such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, as may be reasonably necessary to attempt to block or overturn any attempts to cause a repeal of, modification of or supplement to the Storm Recovery Law or the Financing Order, or the rights of holders of Storm Recovery Property by legislative enactment, constitutional amendment or other means that would be adverse to Holders. In any proceedings related to the exercise of the power of eminent domain by any municipality to acquire a portion of Duke Energy Carolinas's electric distribution facilities, the Servicer will assert that the court ordering such condemnation must treat such municipality as a successor to Duke Energy Carolinas under the Storm Recovery Law and the Financing Order. The costs of any such action shall be payable as an Operating Expense in accordance with the priorities set forth in Section 8.02(d) of the Indenture and any additional indenture. The Servicer's obligations pursuant to this Section 5.02 shall survive and continue notwithstanding the fact that the payment of Operating Expenses pursuant to Section 8.02 of the Indenture and any supplemental indenture may be delayed; provided, that, the Servicer is obligated to institute and maintain such action or proceedings only if it is being reimbursed on a current basis for its costs and expenses in taking such actions in accordance with Section 8.02 of the Indenture and any additional indenture, and is not required to advance its own funds to satisfy these obligations.

Section 5.03. <u>Custodian's Indemnification</u>. The Servicer as custodian shall indemnify the Issuer, any Independent Manager and the Indenture Trustee (for itself and for the benefit of the Holders) and each of their respective officers, directors, employees and agents for, and defend and hold harmless each such Person from and against, any and all liabilities, obligations, losses, damages, payments and claims, and reasonable costs or expenses, of any kind whatsoever (collectively, "<u>Indemnified Losses</u>") that may be imposed on, incurred by or asserted against each such Person as the result of any negligent act or omission in any way relating to the maintenance and custody by the Servicer, as custodian, of the Storm Recovery Property Records; provided, however, that the Servicer shall not be liable for any portion of any such amount resulting from the willful misconduct, bad faith or gross negligence of the Issuer, any Independent Manager or the Indenture Trustee, as the case may be.

Indemnification under this <u>Section 5.03</u> shall survive resignation or removal of the Indenture Trustee or any Independent Manager and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys' fees and expenses and expenses and the reasonable fees, out-of-pocket expenses and costs incurred in connection with any action, claim or suit brought to enforce the indemnification obligations of the Servicer hereunder).

Section 5.04. <u>Effective Period and Termination</u>. The Servicer's appointment as custodian shall become effective as of the Closing Date and shall continue in full force and effect until terminated pursuant to this <u>Section 5.04</u>. If the Servicer shall resign as Servicer in accordance with the provisions of this Servicing Agreement or if all of the rights and obligations of the Servicer shall have been terminated under <u>Section 7.01</u>, the appointment of the Servicer as custodian shall be terminated effective as of the date on which the termination or resignation of the Servicer is effective. Additionally, if not sooner terminated as provided above, the Servicer's obligations as custodian shall terminate one year and one day after the date on which no Storm Recovery Bonds are Outstanding. Duke Energy Carolinas shall not resign as Servicer if such resignation does not satisfy the Rating Agency Condition or without consent of the Commission.

Section 5.05. <u>Third-Party Suppliers</u>. So long as any of the Storm Recovery Bonds are Outstanding, the Servicer shall take reasonable efforts to assure that no TPS bills or collects Storm Recovery Charges on behalf of the Issuer unless required by applicable law or regulation and, to the extent permitted by applicable law or regulation, the Rating Agency Condition is satisfied. If a TPS does bill or collect Storm Recovery Charges on behalf of the Issuer, upon the reasonable request of the Issuer, the Commission, the Indenture Trustee, or any Rating Agency, the Servicer shall take reasonable steps to assure that such a TPS provides to the Issuer, the Commission, the Indenture Trustee or the Rating Agencies, as the case may be, any public financial information in respect of such TPS, or any material information regarding the Storm Recovery Property to the extent it is reasonably available to such TPS, as may be reasonably necessary and permitted by law for the Issuer, the Commission, the Indenture Trustee or the Rating Agencies to monitor such TPS' performance hereunder. In addition, so long as any of the Storm Recovery Bonds are Outstanding, Servicer will use commercially reasonable efforts to ensure that such TPS provide to the Issuer and to the Indenture Trustee, within a reasonable time after written request therefor, any information available to the TPS or reasonably obtainable by it that is necessary to calculate the Storm Recovery Charges.

**ARTICLE VI<br> THE SERVICER**

Section 6.01. <u>Representations and Warranties of Servicer</u>. The Servicer makes the following representations and warranties, as of the Closing Date, and as of such other dates as expressly provided in this <u>Section 6.01</u>, on which the Issuer and the Indenture Trustee are deemed to have relied in entering into this Servicing Agreement relating to the servicing of the Storm Recovery Property, and on which the Commission relied in exercising its rights to review and provide input pursuant to the terms of the Financing Order. The representations and warranties shall survive the execution and delivery of this Servicing Agreement, the sale of the Storm Recovery Property and the pledge thereof to the Indenture Trustee pursuant to the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Organization and Good Standing</u>. The Servicer is duly organized, validly existing and is in good standing under the laws of the state of its organization, with requisite power and authority to own its properties, to conduct its business as such properties are currently owned and such business is presently conducted by it, to service the Storm Recovery Property and hold the records related to the Storm Recovery Property, and to execute, deliver and carry out the terms of this Servicing Agreement and the Intercreditor Agreements.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Due Qualification</u>. The Servicer is duly qualified to do business, is in good standing and has obtained all necessary licenses and approvals in all jurisdictions in which the ownership or lease of property or the conduct of its business (including the servicing of the Storm Recovery Property as required under this Servicing Agreement) requires such qualifications, licenses or approvals (except where a failure to qualify would not be reasonably likely to have a material adverse effect on the Servicer's business, operations, assets, revenues or properties or to its servicing of the Storm Recovery Property).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Power and Authority</u>. The execution, delivery and performance of the terms of this Servicing Agreement and the Intercreditor Agreements have been duly authorized by all necessary action on the part of the Servicer under its organizational or governing documents and laws.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Binding Obligation</u>. Each of this Servicing Agreement and the Intercreditor Agreements constitutes a legal, valid and binding obligation of the Servicer enforceable against the Servicer in accordance with its respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer and other laws relating to or affecting creditors' rights generally from time to time in effect and to general principles of equity (including concepts of materiality, reasonableness, good faith and fair dealing), regardless of whether considered in a proceeding in equity or at law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>No Violation</u>. The consummation of the transactions contemplated by the Servicing Agreement and the Intercreditor Agreements do not conflict with, result in any breach of or constitute (with or without notice or lapse of time) a default under the Servicer's organizational documents or any indenture or other agreement or instrument to which the Servicer is a party or by which it or any of its property is bound, result in the creation or imposition of any Lien upon the Servicer's properties pursuant to the terms of any such indenture or agreement or other instrument (other than any Lien that may be granted in favor of the Indenture Trustee for the benefit of Holders under the Basic Documents) or violate any existing law or any existing order, rule or regulation applicable to the Servicer of any Governmental Authority having jurisdiction over the Servicer or its properties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>No Proceedings</u>. To the Servicer's knowledge, there are no proceedings or investigations pending or, to the Servicer's knowledge, threatened against the Servicer before any court, federal or state regulatory body, administrative agency or other governmental instrumentality having jurisdiction over the Servicer or its properties: (i) seeking to prevent issuance of the Storm Recovery Bonds or the consummation of the transactions contemplated by this Servicing Agreement or any of the other Basic Documents, or, if applicable, any supplement to the Indenture or amendment to the Sale Agreement; (ii) seeking any determination or ruling that might materially and adversely affect the performance by the Servicer of its obligations under, or the validity or enforceability against the Servicer of, this Servicing Agreement or any of the other Basic Documents or, if applicable, any supplement to the Indenture or amendment to the Sale Agreement; or (iii) relating to the Servicer and which might materially and adversely affect the treatment of the Storm Recovery Bonds for federal or state income, gross receipts or franchise tax purposes;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Approvals</u>. No governmental approvals, authorizations, consents, orders or other actions or filings with any Governmental Authority are required for the Servicer to execute, deliver and perform its obligations under the Servicing Agreement except those that have previously been obtained or made, those that are required to be made by the Servicer in the future pursuant to <u>Article IV</u> or the Intercreditor Agreements and those that the Servicer may need to file in the future to continue the effectiveness of any financing statements; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Reports and Certificates</u>. Each report and certificate delivered in connection with any filing made to the Commission by the Servicer on behalf of the Issuer with respect to the Storm Recovery Charges or True-Up Adjustments will constitute a representation and warranty by the Servicer that each such report or certificate, as the case may be, is true and correct in all material respects; provided, however, that, to the extent any such report or certificate is based in part upon or contains assumptions, forecasts or other predictions of future events, the representation and warranty of the Servicer with respect thereto will be limited to the representation and warranty that such assumptions, forecasts or other predictions of future events are reasonable based upon historical performance (and facts known to the Servicer on the date such report or certificate is delivered).

The Servicer, the Indenture Trustee and the Issuer are not responsible as a result of any action, decision, ruling or other determination made or not made, or any delay (other than any delay resulting from the Servicer's failure to make any filings with the Commission required by this Servicing Agreement in a timely and correct manner or any breach by the Servicer of its duties under the Servicing Agreement that adversely affects the Storm Recovery Property or the True-Up Adjustments), by the Commission in any way related to the Storm Recovery Property or in connection with any True-Up Adjustment, the subject of any such filings, any proposed True-Up Adjustment or the approval of any revised Storm Recovery Charges and the scheduled adjustments thereto. Except to the extent that the Servicer otherwise is liable under the provisions of this Servicing Agreement, the Servicer shall have no liability whatsoever relating to the calculation of any revised storm recovery charges and the scheduled adjustments thereto, including as a result of any inaccuracy of any of the assumptions made in such calculations, so long as the Servicer has acted in good faith and has not acted in a negligent manner in connection therewith, nor shall the Servicer have any liability whatsoever as a result of any person or entity, including the Holders, not receiving any payment, amount or return anticipated or expected or in respect of any Storm Recovery Bond generally.

Section 6.02. <u>Indemnities of Servicer; Release of Claims</u>. The Servicer shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Servicer under this Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall indemnify the Issuer, the Indenture Trustee (for itself and for the benefit of the Holders) and the Independent Manager and each of their respective trustees, officers, directors, employees and agents (each, an "<u>Indemnified Party</u>"), for, and defend and hold harmless each such Person from and against, any and all Indemnified Losses imposed on, incurred by or asserted against any such Person as a result of (i) the Servicer's willful misconduct, bad faith or negligence in the performance of, or reckless disregard of, its duties or observance of its covenants under the Servicing Agreement and the Intercreditor Agreements, (ii) the Servicer's material breach of any of its representations or warranties that results in a Servicer Default under this Servicing Agreement or a default under the Intercreditor Agreements; and (iii) litigation and related expenses relating to the Servicer's status and obligations as Servicer (other than any proceeding the Servicer is required to institute under this Servicing Agreement), except to the extent of Indemnified Losses either resulting from the willful misconduct, bad faith or gross negligence of such Person seeking indemnification hereunder or resulting from a breach of a representation or warranty made by such Person seeking indemnification hereunder in any of the Basic Documents that gives rise to the Servicer's breach.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) For purposes of <u>Section 6.02(a)</u>, in the event of the termination of the rights and obligations of Duke Energy Carolinas (or any successor thereto pursuant to <u>Section 6.03</u>) as Servicer pursuant to <u>Section 7.01</u>, or a resignation by such Servicer pursuant to this Servicing Agreement, such Servicer shall be deemed to be the Servicer pending appointment of a Successor Servicer pursuant to <u>Section 7.02</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Indemnification under this <u>Section 6.02</u> shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Storm Recovery Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or any Independent Manager or the termination of this Servicing Agreement and shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys' fees and expenses).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Except to the extent expressly provided in this Servicing Agreement or the other Basic Documents (including the Servicer's claims with respect to the Servicing Fee and the payment of the purchase price of Storm Recovery Property), the Servicer hereby releases and discharges the Issuer, any Independent Manager and the Indenture Trustee, and each of their respective officers, directors and agents (collectively, the "<u>Released Parties</u>"), from any and all actions, claims and demands whatsoever, whenever arising, which the Servicer, in its capacity as Servicer or otherwise, shall or may have against any such Person relating to the Storm Recovery Property or the Servicer's activities with respect thereto, other than any actions, claims and demands arising out of the willful misconduct, bad faith or gross negligence of the Released Parties.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Servicer will credit Customers to the extent there are higher Storm Recovery Charges, including higher servicing fees payable to a Successor Servicer, because of the Servicer's negligence, recklessness, willful misconduct or termination of the Servicing Agreement for cause, provided, however, that any credit to Customers shall not impact the Storm Recovery Charges or the Storm Recovery Property. The Servicer's obligation to credit Customers will survive the termination of the servicing agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Servicer shall not be required to indemnify an Indemnified Party for any amount paid or payable by such Indemnified Party in the settlement of any action, proceeding or investigation without the written consent of the Servicer, which consent shall not be unreasonably withheld. Promptly after receipt by an Indemnified Party of notice (or, in the case of the Indenture Trustee, receipt of notice by a Responsible Officer of the Indenture Trustee only) of the commencement of any action, proceeding or investigation, such Indemnified Party shall, if a claim in respect thereof is to be made against the Servicer under this <u>Section 6.02</u>, notify the Servicer in writing of the commencement thereof. Failure by an Indemnified Party to so notify the Servicer shall relieve the Servicer from the obligation to indemnify and hold harmless such Indemnified Party under this <u>Section 6.02</u> only to the extent that the Servicer suffers actual prejudice as a result of such failure. With respect to any action, proceeding or investigation brought by a third party for which indemnification may be sought under this <u>Section 6.02</u>, the Servicer shall be entitled to conduct and control, at its expense and with counsel of its choosing that is reasonably satisfactory to such Indemnified Party, the defense of any such action, proceeding or investigation (in which case the Servicer shall not thereafter be responsible for the fees and expenses of any separate counsel retained by the Indemnified Party except as set forth below); provided, that the Indemnified Party shall have the right to participate in such action, proceeding or investigation through counsel chosen by it and at its own expense. Notwithstanding the Servicer's election to assume the defense of any action, proceeding or investigation, the Indemnified Party shall have the right to employ separate counsel (including local counsel), and the Servicer shall bear the reasonable fees, costs and expenses of such separate counsel, if (i) the defendants in any such action include both the Indemnified Party and the Servicer and the Indemnified Party shall have reasonably concluded that there may be legal defenses available to it that are different from or additional to those available to the Servicer, (ii) the Servicer shall not have employed counsel reasonably satisfactory to the Indemnified Party to represent the Indemnified Party within a reasonable time after notice of the institution of such action, (iii) the Servicer shall authorize the Indemnified Party to employ separate counsel at the expense of the Servicer or (iv) in the case of the Indenture Trustee, such action exposes the Indenture Trustee to a material risk of criminal liability or forfeiture or a Servicer Default has occurred and is continuing. Notwithstanding the foregoing, the Servicer shall not be obligated to pay for the fees, costs and expenses of more than one separate counsel for the Indemnified Parties other than one local counsel, if appropriate. The Servicer will not, without the prior written consent of the Indemnified Party, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought under this <u>Section 6.02</u> (whether or not the Indemnified Party is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of the Indemnified Party from all liability arising out of such claim, action, suit or proceeding.

Section 6.03. <u>Binding Effect of Servicing Obligations</u>. The obligations to continue to provide service and to collect and account for Storm Recovery Charges will be binding upon the Servicer, any Successor and any other entity that provides distribution services to a Person that is a North Carolina retail customer of Duke Energy Carolinas or any Successor so long as the Storm Recovery Charges have not been fully collected and posted. Any Person (a) into which the Servicer may be merged, converted or consolidated and that is a Permitted Successor, (b) that may result from any merger, conversion or consolidation to which the Servicer shall be a party and that is a Permitted Successor, (c) that may succeed to the properties and assets of the Servicer substantially as a whole and that is a Permitted Successor or (d) that otherwise is a Permitted Successor, which Person in any of the foregoing cases executes an agreement of assumption to perform all of the obligations of the Servicer hereunder, shall be the successor to the Servicer under this Servicing Agreement without further act on the part of any of the parties to this Servicing Agreement; provided, however, that (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to <u>Section 6.01</u> shall have been breached and no Servicer Default and no event that, after notice or lapse of time, or both, would become a Servicer Default shall have occurred and be continuing, (ii) the Servicer shall have delivered to the Issuer, the Commission, the Indenture Trustee and the Rating Agencies an Officer's Certificate and an Opinion of Counsel from external counsel stating that such consolidation, conversion, merger or succession and such agreement of assumption complies with this <u>Section 6.03</u> and that all conditions precedent, if any, provided for in this Servicing Agreement relating to such transaction have been complied with, (iii) the Servicer shall have delivered to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies an Opinion of Counsel from external counsel of the Servicer either (A) stating that, in the opinion of such counsel, all filings to be made by the Servicer, including filings with the Commission pursuant to the Storm Recovery Law and the UCC, have been executed and filed and are in full force and effect that are necessary to fully preserve, perfect and maintain the priority of the interests of the Issuer and the Liens of the Indenture Trustee in the Storm Recovery Property and reciting the details of such filings or (B) stating that, in the opinion of such counsel, no such action shall be necessary to preserve and protect such interests, (iv) the Servicer shall have delivered to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies an Opinion of Counsel from independent tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material adverse U.S. federal income tax consequence to the Issuer or the Holders of Storm Recovery Bonds, (v) the Servicer shall have given the Rating Agencies prior written notice of such transaction and (vi) any applicable requirements of the Intercreditor Agreements have been satisfied. When any Person (or more than one Person) acquires the properties and assets of the Servicer substantially as a whole or otherwise becomes the successor, by merger, conversion, consolidation, sale, transfer, lease or otherwise, to all or substantially all the assets of the Servicer in accordance with the terms of this <u>Section 6.03</u>, then, upon satisfaction of all of the other conditions of this <u>Section 6.03</u>, the preceding Servicer shall automatically and without further notice be released from all its obligations hereunder (except for responsibilities for its actions prior to such release).

Section 6.04. <u>Limitation on Liability of Servicer and Others</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as otherwise provided under this Servicing Agreement, neither the Servicer nor any of the directors, officers, employees or agents of the Servicer shall be liable to the Issuer or any other Person for any action taken or for refraining from the taking of any action pursuant to this Servicing Agreement or for good faith errors in judgment; provided, however, that this provision shall not protect the Servicer or any such Person against any liability that would otherwise be imposed by reason of negligence, recklessness or willful misconduct in the performance of duties or by reason of reckless disregard of obligations and duties under this Servicing Agreement. The Servicer and any director, officer, employee or agent of the Servicer may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising under this Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer acknowledges under the authority granted to the Commission pursuant to Chapter 62 of the North Carolina General Statutes that the Commission has authority to enter an order enforcing the provisions of this Servicing Agreement, including without limitation the enforcement of <u>Section 6.02</u> consistent with the Financing Order and Storm Recovery Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Except as provided in this Servicing Agreement, including <u>Section 5.02(d),</u> the Servicer shall not be under any obligation to appear in, prosecute or defend any legal action relating to the Storm Recovery Property that is not directly related to one of the Servicer's enumerated duties in this Servicing Agreement or related to its obligation to pay indemnification, and that in its reasonable opinion may cause it to incur any expense or liability; provided, however, that the Servicer may, in respect of any Proceeding, undertake any action that it is not specifically identified in this Servicing Agreement as a duty of the Servicer but that the Servicer reasonably determines is necessary or desirable in order to protect the rights and duties of the Issuer or the Indenture Trustee under this Servicing Agreement and the interests of the Holders and Customers under this Servicing Agreement.

Section 6.05. <u>Duke Energy Carolinas Not to Resign as Servicer</u>. Subject to the provisions of Section 6.03, Duke Energy Carolinas, or any Permitted Successor, shall not resign from the obligations and duties imposed on it as Servicer under this Servicing Agreement except upon a determination that the performance of its duties under this Servicing Agreement shall no longer be permissible under applicable Requirements of Law. Notice of any such determination permitting the resignation of Duke Energy Carolinas shall be communicated to the Issuer, the Commission, the Indenture Trustee and each Rating Agency at the earliest practicable time (and, if such communication is not in writing, shall be confirmed in writing at the earliest practicable time), and any such determination shall be evidenced by an Opinion of Counsel to such effect delivered to the Issuer, the Commission and the Indenture Trustee concurrently with or promptly after such notice. No such resignation shall become effective until a Successor Servicer has been approved by the Commission and has assumed the servicing obligations and duties hereunder of the Servicer in accordance with Section 7.02.

Section 6.06. <u>Servicing Compensation</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In consideration for its services hereunder, until the Collection in Full of the Charges, the Servicer shall receive an annual fee (the "<u>Servicing Fee</u>") in an amount equal to (i) 0.05% of the aggregate initial principal amount of all Storm Recovery Bonds plus, so long as Duke Energy Carolinas or an Affiliate of Duke Energy Carolinas is the Servicer, reimbursement for filing fees and fees and expenses for attorneys, accountants, printing or other professional services retained by the Issuer and paid for by the Servicer (or procured by the Servicer on behalf of the Issuer and paid for by the Servicer) to meet the Issuer's obligations under the Basic Documents ("Reimbursable Expenses") or (ii) if Duke Energy Carolinas or any of its Affiliates is not the Servicer, an amount agreed upon by the Successor Servicer and the Indenture Trustee (acting at the written direction of a majority of Holders), provided, that the annual Servicing Fee shall not exceed 0.60% of the aggregate initial principal amount of all Storm Recovery Bonds, unless the Commission has approved the appointment of the Successor Servicer or the Commission does not act to either approve or disapprove such appointment on or before the date which is 45 days after notice of the proposed appointment of the Successor Servicer is provided to the Commission in the same manner substantially as provided in <u>Section 8.01(c)</u>. The Servicing Fee owing shall be calculated based on the initial principal amount of the Storm Recovery Bonds and shall be paid semi-annually, with half of the Servicing Fee being paid on each Payment Date, except for the amount of the Servicing Fee to be paid on the first Payment Date in which the Servicing Fee then due will be calculated based on the number of days that this Servicing Agreement has been in effect. Except for the above Reimbursable Expenses, the Servicer shall be required to pay all other costs and expenses incurred by the Servicer in performing its activities hereunder (but, for the avoidance of doubt, excluding any such costs and expenses incurred by Duke Energy Carolinas in its capacity as Administrator).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicing Fee set forth in <u>Section 6.06(a)</u> shall be paid to the Servicer by the Indenture Trustee, on each Payment Date in accordance with the priorities set forth in Section 8.02(e) of the Indenture, by wire transfer of immediately available funds from the Collection Account to an account designated by the Servicer. Any portion of the Servicing Fee not paid on any such date shall be added to the Servicing Fee payable on the subsequent Payment Date. In no event shall the Indenture Trustee be liable for the payment of any Servicing Fee or other amounts specified in this <u>Section 6.06</u>; provided, that this <u>Section 6.06</u> does not relieve the Indenture Trustee of any duties it has to allocate funds for payment for such fees under Section 8.02 of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Servicer and the Issuer acknowledge and agree that the Servicer's actual collections of Storm Recovery Charges on some days might exceed the Servicer's deemed collections, and that the Servicer's actual collections of Storm Recovery Charges on other days might be less than the Servicer's deemed collections. The Servicer and the Issuer further acknowledge and agree that the amount of these variances are likely to be small and are not likely to be biased in favor of over-remittances or under-remittances. Consequently, so long as the Servicer faithfully makes all daily remittances based on weighted average days sales outstanding, as provided for herein, the Servicer and the Issuer agree that no actual or deemed investment earnings shall be payable in respect of such over-remittances or under-remittances. However, the Servicer shall remit at least annually to the Indenture Trustee, for the benefit of the Issuer, any late payment charges received from Customers in respect of Storm Recovery Charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) The foregoing Servicing Fee constitutes a fair and reasonable compensation for the obligations to be performed by the Servicer. Such Servicing Fee shall be determined without regard to the income of the Issuer, shall not be deemed to constitute distributions to the recipient of any profit, loss or capital of the Issuer and shall be considered a fixed Operating Expense of the Issuer subject to the limitations on such expenses set forth in the Financing Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) Any services required for or contemplated by the performance of the above-referenced services by the Servicer to be provided by unaffiliated third parties may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Servicer at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Servicer and reimbursed by the Issuer in accordance with <u>Section 6.06(a)</u>, or otherwise as the Servicer and the Issuer may mutually arrange.

Section 6.07. <u>Compliance with Applicable Law</u>. The Servicer covenants and agrees, in servicing the Storm Recovery Property, to comply in all material respects with all laws applicable to, and binding upon, the Servicer and relating to the Storm Recovery Property, the noncompliance with which would have a material adverse effect on the value of the Storm Recovery Property; provided, however, that the foregoing is not intended to, and shall not, impose any liability on the Servicer for noncompliance with any Requirement of Law that the Servicer is contesting in good faith in accordance with its customary standards and procedures. It is expressly acknowledged that the payment of fees to the Rating Agencies shall be at the expense, and as an Operating Expense, of the Issuer and that, if the Servicer advances such payments to the Rating Agencies, the Issuer shall reimburse the Servicer for any such advances.

Section 6.08. <u>Access to Certain Records and Information Regarding Storm Recovery Property</u>. The Servicer shall provide to the Indenture Trustee access to the Storm Recovery Property Records for the Storm Recovery Bonds as is reasonably required for the Indenture Trustee to perform its duties and obligations under the Indenture and the other Basic Documents and shall provide access to such records to the Holders as required by applicable law. Access shall be afforded without charge, but only upon reasonable request and during normal business hours at the offices of the Servicer. Nothing in this <u>Section 6.08</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section 6.08</u>.

Section 6.09. <u>Appointments</u>. The Servicer may at any time appoint any Person to perform all or any portion of its obligations as Servicer hereunder, including a collection agent acting pursuant to the Intercreditor Agreements; provided, however, that, unless such Person is an Affiliate of Duke Energy Carolinas, the Rating Agency Condition shall have been satisfied in connection therewith; provided, further, that the Servicer shall remain obligated and be liable under this Servicing Agreement for the servicing and administering of the Storm Recovery Property in accordance with the provisions hereof without diminution of such obligation and liability by virtue of the appointment of such Person and to the same extent and under the same terms and conditions as if the Servicer alone were servicing and administering the Storm Recovery Property. The fees and expenses of any such Person shall be as agreed between the Servicer and such Person from time to time, and none of the Issuer, the Indenture Trustee, the Holders or any other Person shall have any responsibility therefor or right or claim thereto. Any such appointment shall not constitute a Servicer resignation under <u>Section 6.05</u>.

Section 6.10. <u>No Servicer Advances</u>. The Servicer shall not make any advances of interest on or principal of the Storm Recovery Bonds.

Section 6.11. <u>Remittances</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Storm Recovery Charge Collections deemed collected on any Servicer Business Day (the "<u>Daily Remittance</u>") shall be calculated according to the procedures set forth in <u>Exhibit A</u> and remitted by the Servicer as soon as reasonably practicable to the General Subaccount of the Collection Account but in no event later than two Servicer Business Days following such Servicer Business Day. Prior to each remittance to the General Subaccount of the Collection Account pursuant to this <u>Section 6.11</u>, the Servicer shall provide written notice (which may be via electronic means, including electronic mail) to the Indenture Trustee and, upon request, to the Issuer of each such remittance (including the exact dollar amount to be remitted). The Servicer shall also, promptly upon receipt, remit to the Collection Account any other proceeds of the Storm Recovery Collateral that it may receive from time to time. Reconciliations of bank statements shall be as set forth in <u>Exhibit A</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer agrees and acknowledges that it holds all Storm Recovery Charge Payments collected by it and any other proceeds for the Storm Recovery Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer in accordance with this <u>Section 6.11</u> without any surcharge, fee, offset, charge or other deduction except for and investment earnings permitted by <u>Section 6.06</u>. The Servicer further agrees not to make any claim to reduce its obligation to remit all Storm Recovery Charge Payments collected by it in accordance with this Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Unless otherwise directed to do so by the Issuer, the Servicer shall be responsible for selecting Eligible Investments in which the funds in the Collection Account shall be invested pursuant to Section 8.03 of the Indenture.

Section 6.12. <u>Maintenance of Operations</u>. Subject to <u>Section 6.03</u>, Duke Energy Carolinas agrees to continue, unless prevented by circumstances beyond its control, to operate its electric distribution system to provide service so long as it is acting as the Servicer under this Servicing Agreement.

**ARTICLE VII<br> DEFAULT**

Section 7.01. <u>Servicer Default</u>. If any one or more of the following events (a "<u>Servicer Default</u>") shall occur and be continuing:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) any failure by the Servicer to remit to the Collection Account on behalf of the Issuer any required remittance that shall continue unremedied for a period of five Business Days after written notice of such failure is received by the Servicer from the Issuer or the Indenture Trustee (with a copy of such notice being provided promptly upon receipt by the Servicer to the Commission) or after discovery of such failure by a Responsible Officer of the Servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) any failure on the part of the Servicer or, so long as the Servicer is Duke Energy Carolinas or an Affiliate thereof, any failure on the part of Duke Energy Carolinas, as the case may be, duly to observe or to perform in any material respect any covenants or agreements of the Servicer or Duke Energy Carolinas, as the case may be, set forth in this Servicing Agreement (other than as provided in <u>Section 7.01(a)</u> or <u>Section 7.01(c)</u>) or any other Basic Document to which it is a party, which failure shall (i) materially and adversely affect the rights of the Holders and (ii) continue unremedied for a period of 60 days after the date on which (A) written notice of such failure, requiring the same to be remedied, shall have been given to the Servicer or Duke Energy Carolinas, as the case may be, by the Issuer, the Commission (with a copy to the Indenture Trustee) or to the Servicer or Duke Energy Carolinas, as the case may be, by the Indenture Trustee or (B) such failure is discovered by a Responsible Officer of the Servicer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) any failure by the Servicer duly to perform its obligations under <u>Section 4.01(b)</u> in the time and manner set forth therein, which failure continues unremedied for a period of five Business Days;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) any representation or warranty made by the Servicer in this Servicing Agreement or any other Basic Document shall prove to have been incorrect in a material respect when made, which has a material adverse effect on the Holders and which material adverse effect continues unremedied for a period of 60 days after the date on which (i) written notice thereof, requiring the same to be remedied, shall have been delivered to the Servicer (with a copy to the Indenture Trustee) by the Issuer or the Indenture Trustee (with a copy of such notice being provided promptly upon receipt by the Servicer to the Commission), or (ii) such failure is discovered by a Responsible Officer of the Servicer; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) an Insolvency Event occurs with respect to the Servicer;

then, and in each and every case, so long as the Servicer Default shall not have been remedied, either the Indenture Trustee shall, upon receiving the written instruction of (i) Holders evidencing a majority of the Outstanding Amount of the Storm Recovery Bonds or (ii) the Commission, subject to the terms of the Intercreditor Agreements, by notice then given in writing to the Servicer (and to the Indenture Trustee if given by the Holders) (a "<u>Termination Notice</u>"), terminate all the rights and obligations (other than the obligations set forth in <u>Section 6.02</u> and the obligation under <u>Section 7.02</u> to continue performing its functions as Servicer until a Successor Servicer is appointed) of the Servicer under this Servicing Agreement and under the Intercreditor Agreements; *provided*, *however* the Indenture Trustee shall not give a Termination Notice upon instruction of the Commission unless the Rating Agency Condition is satisfied. In addition, upon a Servicer Default described in <u>Section 7.01(a)</u>, the Holders and the Indenture Trustee as financing parties under the Storm Recovery Law (or any of their representatives) shall be entitled to apply to the Commission or a court of appropriate jurisdiction for an order for sequestration and payment of revenues arising with respect to the Storm Recovery Property. On or after the receipt by the Servicer of a Termination Notice, all authority and power of the Servicer under this Servicing Agreement, whether with respect to the Storm Recovery Bonds, the Storm Recovery Property, the Storm Recovery Charges or otherwise, shall, without further action, pass to and be vested in such Successor Servicer as may be appointed under <u>Section 7.02</u>; and, without limitation, the Indenture Trustee is hereby authorized and empowered to execute and deliver, on behalf of the predecessor Servicer, as attorney-in-fact or otherwise, any and all documents and other instruments, and to do or accomplish all other acts or things necessary or appropriate to effect the purposes of such Termination Notice, whether to complete the transfer of the Storm Recovery Property Records and related documents, or otherwise. The predecessor Servicer shall cooperate with the Successor Servicer, the Issuer and the Indenture Trustee in effecting the termination of the responsibilities and rights of the predecessor Servicer under this Servicing Agreement, including the transfer to the Successor Servicer for administration by it of all Storm Recovery Property Records and all cash amounts that shall at the time be held by the predecessor Servicer for remittance, or shall thereafter be received by it with respect to the Storm Recovery Property or the Storm Recovery Charges. As soon as practicable after receipt by the Servicer of such Termination Notice, the Servicer shall deliver the Storm Recovery Property Records to the Successor Servicer. In case a Successor Servicer is appointed as a result of a Servicer Default, all reasonable costs and expenses (including reasonable attorneys' fees and expenses) incurred in connection with transferring the Storm Recovery Property Records to the Successor Servicer and amending this Servicing Agreement and the Intercreditor Agreements to reflect such succession as Servicer pursuant to this <u>Section 7.01</u> shall be paid by the predecessor Servicer upon presentation of reasonable documentation of such costs and expenses. Termination of Duke Energy Carolinas as Servicer shall not terminate Duke Energy Carolinas's rights or obligations under the Sale Agreement (except rights thereunder deriving from its rights as the Servicer hereunder).

Section 7.02. <u>Appointment of Successor</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Upon the Servicer's receipt of a Termination Notice pursuant to <u>Section 7.01</u> or the Servicer's resignation or removal in accordance with the terms of this Servicing Agreement, the predecessor Servicer shall continue to perform its functions as Servicer under this Servicing Agreement and shall be entitled to receive the requisite portion of the Servicing Fee, until a Successor Servicer shall have assumed in writing the obligations of the Servicer hereunder as described below. In the event of the Servicer's removal or resignation hereunder, the Indenture Trustee, at the written direction and with the consent of the Holders of a majority of the Outstanding Amount of the Storm Recovery Bonds or of the Commission, shall, but subject to the provisions of the Intercreditor Agreements, appoint a Successor Servicer with the Issuer's prior written consent thereto (which consent shall not be unreasonably withheld), and the Successor Servicer shall accept its appointment by a written assumption in form reasonably acceptable to the Issuer and the Indenture Trustee and provide prompt written notice of such assumption to the Issuer, the Commission and the Rating Agencies. If, within 30 days after the delivery of the Termination Notice, a new Servicer shall not have been appointed, the Indenture Trustee will, at the written direction of the Holders of a majority of the Storm Recovery Bonds, petition the Commission or a court of competent jurisdiction to appoint a Successor Servicer under this Servicing Agreement. A Person shall qualify as a Successor Servicer only if (i) such Person is permitted under Commission Regulations to perform the duties of the Servicer, (ii) the Rating Agency Condition shall have been satisfied, (iii) such Person enters into a servicing agreement with the Issuer having substantially the same provisions as this Servicing Agreement and (iv) such Person agrees to perform the obligations of the Servicer under the Intercreditor Agreements. In no event shall the Indenture Trustee be liable for its appointment of a Successor Servicer. The Indenture Trustee's expenses incurred under this <u>Section 7.02(a)</u> shall be at the sole expense of the Issuer and payable from the Collection Account as provided in Section 8.02 of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Upon appointment, the Successor Servicer shall be the successor in all respects to the predecessor Servicer and shall be subject to all the responsibilities, duties and liabilities arising thereafter placed on the predecessor Servicer and shall be entitled to the Servicing Fee and all the rights granted to the predecessor Servicer by the terms and provisions of this Servicing Agreement.

Section 7.03. <u>Waiver of Past Defaults</u>. The Indenture Trustee, with the written consent of the Holders evidencing a majority of the Outstanding Amount of the Storm Recovery Bonds, may waive in writing any default by the Servicer in the performance of its obligations hereunder and its consequences, except a default in making any required deposits to the Collection Account in accordance with this Servicing Agreement. Upon any such waiver of a past default, such default shall cease to exist, and any Servicer Default arising therefrom shall be deemed to have been remedied for every purpose of this Servicing Agreement. No such waiver shall extend to any subsequent or other default or impair any right consequent thereto. Promptly after the execution of any such waiver, the Servicer shall furnish copies of such waiver to each of the Rating Agencies and the Commission.

Section 7.04. <u>Notice of Servicer Default</u>. The Servicer shall deliver to the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, promptly after having obtained knowledge thereof, but in no event later than five Business Days thereafter, written notice of any event that, with the giving of notice or lapse of time, or both, would become a Servicer Default under <u>Section 7.01</u>.

Section 7.05. <u>Cooperation with Successor</u>. The Servicer covenants and agrees with the Issuer that it will, on an ongoing basis, cooperate with the Successor Servicer and provide whatever information is, and take whatever actions are, reasonably necessary to assist the Successor Servicer in performing its obligations hereunder.

**ARTICLE VIII<br> MISCELLANEOUS PROVISIONS**

Section 8.01. <u>Amendment</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to <u>Section 8.01(c),</u> this Servicing Agreement may be amended in writing by the Servicer and the Issuer with the prior written consent of the Indenture Trustee and the satisfaction of the Rating Agency Condition; provided, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the Outstanding Amount. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Prior to the execution of any amendment to this Servicing Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and conclusively rely upon an Opinion of Counsel of external counsel stating that such amendment is authorized and permitted by this Servicing Agreement and all conditions precedent, if any, provided for in this Servicing Agreement relating to such amendment have been satisfied and upon the Opinion of Counsel from external counsel referred to in <u>Section 3.01(c)(i)</u>. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects their own rights, duties, indemnities or immunities under this Servicing Agreement or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Notwithstanding anything to the contrary in this <u>Section 8.01</u>, no amendment or modification of this Servicing Agreement, nor any waiver required by <u>Section 7.03</u> hereof, shall be effective except upon satisfaction of the conditions precedent in this paragraph (c).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) At least 15 days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in <u>Section 8.01(a)</u> (except that the consent of the Indenture Trustee may be subject to the consent of the Holders if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification) the Servicer shall have filed in Commission docket E-7, Sub 1325 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a reference to Docket No. E-7, Sub 1325;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) an Officer's Certificate stating that the proposed amendment or modification has been approved by all parties to this Servicing Agreement or alternatively, the waiver of default has been approved by the Holders of a majority of the Outstanding Amount of Storm Recovery Bonds; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) a statement identifying the person to whom the Commission is to address any response to the proposed amendment or to request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Commission within 15 days (subject to extension as provided in clause (iii)) of receiving a notification complying with subparagraph (i), shall have issued an order that the Commission might object to the proposed amendment or modification, then, except as provided in clause (iv) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in <u>Section 8.01(a)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Following the delivery of an order from the Commission to the Servicer under subparagraph (ii), the Servicer and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment, modification or waiver of default. The fact that the Servicer delivers notice to the Commission pursuant to this <u>Section 8.01(a)</u> does not obligate the Servicer to amend this Servicing Agreement as provided in the notice.

Section 8.02. <u>Maintenance of Accounts and Records</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Servicer shall maintain accounts and records as to the Storm Recovery Property accurately and in accordance with its standard accounting procedures and in sufficient detail to permit reconciliation between Storm Recovery Charge Payments received by the Servicer and Storm Recovery Charge Collections from time to time deposited in the Collection Account.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Servicer shall permit the Indenture Trustee and its agents at any time during normal business hours, upon reasonable notice to the Servicer and to the extent it does not unreasonably interfere with the Servicer's normal operations, to inspect, audit and make copies of and abstracts from the Servicer's records regarding the Storm Recovery Property and the Storm Recovery Charges. Nothing in this <u>Section 8.02(b)</u> shall affect the obligation of the Servicer to observe any applicable law (including any Commission Regulation) prohibiting disclosure of information regarding Customers, and the failure of the Servicer to provide access to such information as a result of such obligation shall not constitute a breach of this <u>Section 8.02(b)</u>.

Section 8.03. <u>Notices</u>. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of the Servicer, to Duke Energy Carolinas, LLC, at (i) 525 South Tryon Street Charlotte, North Carolina 28202, Attention: Director, Rates and Regulatory Strategy, Telephone: 800-488-3853 in care of (c/o): Treasurer and at 525 South Tryon Street, Charlotte, North Carolina 28202, Attention: Structured Finance Director, Telephone: 800-488-3853 c/o Assistant Treasurer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) in the case of the Issuer, to Duke Energy Carolinas NC Storm Funding II LLC, at 525 South Tryon Street Charlotte, North Carolina 28202 Attention: Managers, Telephone: 800-488-3853;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in the case of the Indenture Trustee, to the Corporate Trust Office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) in the case of S&P, to S&P Global Ratings, a S&P Global Inc. business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to S&P in writing by email);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) in the case of Moody's, to Moody's Investors Service, Inc., ABS/RMBS Monitoring Department, 24<sup>th</sup> Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notice to be delivered to Moody's in writing by email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) in the case of the Commission and the Public Staff – North Carolina Utilities Commission, by filing a notice in docket E-7, Sub 1325 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff.

Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

Section 8.04. <u>Assignment</u>. Notwithstanding anything to the contrary contained herein, except as provided in <u>Section 6.03</u> and as provided in the provisions of this Servicing Agreement concerning the resignation of the Servicer, this Servicing Agreement may not be assigned by the Servicer. Any assignment of this Servicing Agreement is subject to satisfaction of any conditions set forth in the Intercreditor Agreements.

Section 8.05. <u>Limitations on Rights of Others</u>. The provisions of this Servicing Agreement are solely for the benefit of the Servicer and the Issuer and, to the extent provided herein or in the other Basic Documents, the Indenture Trustee and the Holders, and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Servicing Agreement. Nothing in this Servicing Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Storm Recovery Property or Storm Recovery Collateral or under or in respect of this Servicing Agreement or any covenants, conditions or provisions contained herein.

Section 8.06. <u>Severability</u>. Any provision of this Servicing Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such a construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 8.07. <u>Separate Counterparts</u>. This Servicing Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. The parties hereto agree that this Servicing Agreement may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by AdobeSign, DocuSign, Diligent Board or any other digital signature provider as specified and agreed upon in writing to the other parties) appearing on this Servicing Agreement are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Servicing Agreement may be made by facsimile, email or other electronic transmission.

Section 8.08. <u>Governing Law</u>. This Servicing Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

Section 8.09. <u>Assignment to Indenture Trustee</u>. The Servicer hereby acknowledges and consents to the assignment by the Issuer to the Indenture Trustee of any or all of the Issuer's rights hereunder. In no event shall the Indenture Trustee have any liability for the representations, warranties, covenants, agreements or other obligations of the Issuer hereunder or in any of the certificates delivered pursuant hereto, as to all of which any recourse shall be had solely to the assets of the Issuer subject to the availability of funds therefor under Section 8.02 of the Indenture.

Section 8.10. <u>Nonpetition Covenants</u>. Notwithstanding any prior termination of this Servicing Agreement or the Indenture, the Servicer shall not, prior to the date that is one year and one day after the satisfaction and discharge of the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke or join with any Person in provoking the process of any Governmental Authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer for any substantial part of the property of the Issuer or ordering the dissolution, winding up or liquidation of the affairs of the Issuer.

Section 8.11. <u>Limitation of Liability</u>. It is expressly understood and agreed by the parties hereto that this Servicing Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee in the exercise of the powers and authority conferred and vested in it, and that the Indenture Trustee, in acting hereunder, is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

Section 8.12. <u>Rule 17g-5 Compliance</u>. The Servicer agrees that any notice, report, request for satisfaction of the Rating Agency Condition, document or other information provided by the Servicer to any Rating Agency under this Servicing Agreement or any other Basic Document to which it is a party for the purpose of determining the initial credit rating of the Storm Recovery Bonds or undertaking credit rating surveillance of the Storm Recovery Bonds with any Rating Agency, or satisfy the Rating Agency Condition, shall be substantially concurrently posted by the Servicer on the 17g-5 Website.

Section 8.13. <u>Indenture Trustee Actions</u>. In acting hereunder, the Indenture Trustee shall have the rights, protections and immunities granted to it under the Indenture.

Section 8.14. <u>Waiver of Jury Trial.</u> EACH OF THE PARTIES HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS INDENTURE AND FOR ANY COUNTERCLAIM THEREIN.

{SIGNATURE PAGE FOLLOWS}

IN WITNESS WHEREOF, the parties hereto have caused this Servicing Agreement to be duly executed by their respective officers as of the day and year first above written.

---

| | | | |
|:---|:---|:---|:---|
|  |  | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, |
|  |  | as Issuer | as Issuer |
|  |  | By: | |
|  |  |  | Name: |
|  |  |  | Title: |
|  |  | DUKE ENERGY CAROLINAS, LLC, | DUKE ENERGY CAROLINAS, LLC, |
|  |  | as Servicer | as Servicer |
|  |  | By: | |
|  |  |  | Name: |
|  |  |  | Title: |
| ACKNOWLEDGED AND ACCEPTED: | ACKNOWLEDGED AND ACCEPTED: |  |  |
| U.S. BANK TRUST COMPANY, | U.S. BANK TRUST COMPANY, |  |  |
| NATIONAL ASSOCIATION, | NATIONAL ASSOCIATION, |  |  |
| not in its individual capacity but solely as Indenture Trustee | not in its individual capacity but solely as Indenture Trustee |  |  |
| By: |  |  |  |
|  | Name: |  |  |
|  | Title: |  |  |

---

*Signature Page to Storm Recovery Servicing Agreement* 

<u>EXHIBIT A</u>

SERVICING PROCEDURES

The Servicer agrees to comply with the following servicing procedures:

SECTION 1. **Definitions.**

Capitalized terms used herein and not otherwise defined herein shall have the meanings ascribed to such terms in the Servicing Agreement (the "<u>Agreement</u>").

SECTION 2. **Data Acquisition**.

(a) <u>Installation and Maintenance of Meters</u>. The Servicer shall cause to be installed, replaced and maintained meters in accordance with the Servicer Policies and Practices.

(b) <u>Meter Reading</u>. In accordance with the Servicer Policies and Practices, the Servicer shall obtain consumption measurements for each Customer or determine any Customer's consumption on the basis of estimates in accordance with Commission Regulations.

(c) <u>Cost of Metering</u>. The Issuer shall not be obligated to pay any costs associated with the metering duties set forth in this Section 2, including the costs of installing, replacing and maintaining meters, nor shall the Issuer be entitled to any credit against the Servicing Fee for any cost savings realized by the Servicer as a result of new metering and/or billing technologies.

SECTION 3. **Consumption and Bill Calculation**.

The Servicer shall obtain a calculation of each Customer's consumption (which may be based on data obtained from such Customer's meter read or on consumption estimates determined in accordance with Commission Regulations) in accordance with the Servicer Policies and Practices and shall determine therefrom Billed Storm Recovery Charges for the Storm Recovery Bonds.

SECTION 4. **Billing**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Commencement of Billing</u>. The Servicer shall implement the Storm Recovery Charges as of the date following Closing Date for the Storm Recovery Bonds and shall thereafter bill each Customer for each Customer's Billed Storm Recovery Charges for the Storm Recovery Bonds in accordance with the provisions of this Section 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Frequency of Bills; Billing Practices</u>. In accordance with the Servicer Policies and Practices, the Servicer shall generate and issue a Bill to each Customer. In the event that the Servicer makes any material modification to the Servicer Policies and Practices, it shall notify the Issuer, the Indenture Trustee and the Rating Agencies as soon as practicable, and in no event later than 30 Servicer Business Days after such modification goes into effect, but the Servicer may not make any modification that will materially adversely affect the Holders.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Format</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Customer's Bill will contain a separate line item identifying the monthly charge representing the Storm Recovery Property. The Customer's Bill shall contain in text or in a footnote, text substantially to the effect that the monthly charge representing Storm Recovery Property has been approved by the Financing Order, and that a portion of the monthly charge is being collected by the Servicer, as servicer, on behalf of the Issuer as owner of the Storm Recovery Property. However, the Storm Recovery Charges will be consolidated with any previously approved storm recovery charges to display one total charge on the Customer's bill.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Servicer shall conform to such requirements in respect of the format, structure and text of Bills delivered to Customers as Commission Regulations shall from time to time prescribe. To the extent that Bill format, structure and text are not prescribed by applicable law or by Commission Regulations, the Servicer shall, subject to clause (i) of this subsection (c), determine the format, structure and text of all Bills in accordance with its reasonable business judgment, the Servicer Policies and Practices and historical practice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Delivery</u>. Except as provided in the next sentence, the Servicer shall deliver all Bills to Customers (i) by United States mail in such class or classes as are consistent with the Servicer Policies and Practices or (ii) by any other means, whether electronic or otherwise, that the Servicer may from time to time use in accordance with the Servicer Policies and Practices. The Servicer shall pay from its own funds all costs of issuance and delivery of all Bills that it renders, including printing and postage costs as the same may increase or decrease from time to time.

SECTION 5. **Customer Service Functions**.

The Servicer shall handle all Customer inquiries and other Customer service matters according to the Servicer Policies and Practices.

SECTION 6. **Collections; Payment Processing; Remittance**.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Collection Efforts, Policies, Procedures</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Servicer shall collect Billed Storm Recovery Charges for the Storm Recovery Bonds (including late payment charges in respect of Storm Recovery Charges) from Customers as and when the same become due in accordance with such collection procedures as it follows with respect to comparable assets that it services for itself or others including, in accordance with Commission Regulations and the Servicer Policies and Practices, that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) The Servicer shall prepare and deliver overdue notices to Customers.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) The Servicer shall deliver past-due and shut-off notices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) The Servicer may employ the assistance of collection agents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(D) The Servicer shall apply Customer deposits to the payment of delinquent accounts.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Servicer shall not waive any late payment charge or any other fee or charge relating to delinquent payments, if any, or waive, vary or modify any terms of payment of any amounts payable by a Customer, in each case unless such waiver or action: (A) would be in accordance with the Servicer Policies and Practices and (B) would comply in all material respects with applicable law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) The Servicer shall accept payment from Customers in respect of Billed Storm Recovery Charges for the Storm Recovery Bonds in such forms and methods and at such times and places in accordance with the Servicer Policies and Practices.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Payment Processing; Allocation; Priority of Payments</u>. The Servicer shall post all payments received to Customer accounts as promptly as practicable, and, in any event, substantially all payments shall be posted no later than two Servicer Business Days after receipt.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) <u>Investment of Estimated Storm Recovery Charge Payments Received</u>. Prior to remittance on the applicable remittance date, the Servicer may invest estimated Storm Recovery Charges Payments at its own risk and for its own benefit, and such investments and funds shall not be required to be segregated from the other investments and funds of the Servicer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Calculation of Daily Remittance</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Servicer will remit Storm Recovery Charges directly to the Indenture Trustee pursuant to Section 6.11 of the Servicing Agreement. The Servicer will remit Storm Recovery Charges based on estimated collections using a weighted average balance of days outstanding ("<u>WADO</u>") on Duke Energy Carolinas's retail bills. Storm Recovery Charge Collections for the Storm Recovery Bonds remitted will represent the charges estimated to be received for any period based upon the WADO and an estimated system-wide write-off percentage.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) The Storm Recovery Charge Collections for the Storm Recovery Bonds will be remitted by the Servicer to the Indenture Trustee as soon as reasonably practicable to the General Subaccount of the Collection Account on each Servicer Business Day, but in no event later than two Servicer Business Days following such Servicer Business Day. Estimated daily Storm Recovery Charge Collections for the Storm Recovery Bonds will be remitted to the Indenture Trustee on each Servicer Business Day based upon the WADO and estimated write-offs. Each day on which those remittances are made is referred to as a daily remittance date.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) No less often than semi-annually, the Servicer will reconcile remittances of estimated Storm Recovery Charge Collections for the Storm Recovery Bonds with actual Storm Recovery Charge Payments for the Storm Recovery Bonds received by the Servicer and remitted to the Indenture Trustee to more accurately reflect the amount of Billed Storm Recovery Charges for the Storm Recovery Bonds that should have been remitted, based on WADO and the actual system-wide write-off percentage. To the extent the remittances of estimated payments arising from the Storm Recovery Charges exceed the amounts that should have been remitted based on actual system-wide write-offs, the Servicer will be entitled to withhold the excess amount from any subsequent remittance to the Indenture Trustee until the balance of such excess is reduced to zero. To the extent the remittances of estimated payments arising from the Storm Recovery Charges are less than the amount that should have been remitted based on actual system wide write-offs, the Servicer will remit the amount of the shortfall to the Indenture Trustee within two Servicer Business Days. Although the Servicer will remit estimated Storm Recovery Charge Collections for the Storm Recovery Bonds to the Indenture Trustee, the Servicer will not be obligated to make any payments on the Storm Recovery Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) At least annually, the Servicer also will remit to the Indenture Trustee, for the benefit of the Issuer, any late payment fees received from Customers with respect to the Storm Recovery Charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) The Servicer agrees and acknowledges that it holds all Storm Recovery Charge Collections for the Storm Recovery Bonds received by it and any other proceeds for the Storm Recovery Collateral received by it for the benefit of the Indenture Trustee and the Holders and that all such amounts will be remitted by the Servicer without any surcharge, fee, offset, charge or other deduction. The Servicer further agrees not to make any claim to reduce its obligation to remit all Storm Recovery Charge Payments for the Storm Recovery Bonds collected by it in accordance with the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>Partial Collections</u>. Upon a partial payment of amounts billed, the amount collected will be prorated among all charge categories, including the Storm Recovery Charges, and any other storm recovery charges approved by the Commission and charges of DEC, in proportion to their percentage of the overall bill.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>No Advances</u>. The Servicer shall not be obligated to advance any of its own funds to the Issuer.

EXHIBIT B

FORM OF MONTHLY SERVICER'S CERTIFICATE

See Attached

**MONTHLY SERVICER'S CERTIFICATE**

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC<br> $[ ] Senior Secured Storm Recovery Bonds**

Pursuant to <u>Section 3.01(b)</u> of the Storm Recovery Property Servicing Agreement dated as of [Closing Date], 2025 by and between **Duke Energy Carolinas, LLC**, as <u>Servicer</u>, and **Duke Energy Carolinas NC Storm Funding II LLC**, as <u>Issuer</u> (the "<u>Servicing Agreement</u>"), the Servicer does hereby certify as follows:

Capitalized terms used but not defined in this Monthly Servicer's Certificate have their respective meanings as set forth in the Servicing Agreement. References herein to certain sections and subsections are references to the respective sections or subsections of the Servicing Agreement.

Current BILLING MONTH: {__________}

**Current BILLING MONTH:** {__/__/20__} - {__/__/20__}

**Standard Billing for prior BILLING MONTH** 

---

| | |
|:---|:---|
| Residential Total Billed | ${__________} |
| Residential STORM RECOVERY CHARGE ("SRC") Billed | ${__________} |
| Small General Service Total Billed | ${__________} |
| Small General Service SRC Billed | ${__________} |
| Medium General Service Billed | ${__________} |
| Medium General Service SRC Billed | ${__________} |
| Large General Service Total Billed | ${__________} |
| Large General Service SRC Billed | ${__________} |
| Lighting Total Billed | ${__________} |
| Lighting SRC Billed | ${__________} |
| <u>YTD Net Write-offs as a % of Billed Revenue</u> |  |
| Non-Residential Class Customer Write-offs | {_.____}% |
| Residential Class Customer Write-offs | {_.____}% |
| Total Write-offs | {_.____}% |

---

**Aggregate SRC Collections**

---

| | |
|:---|:---|
| **Total SRC Remitted for BILLING MONTH** |  |
| Residential SRC Collected | ${__________} |
| Small General Service SRC Collected | ${__________} |
| Medium General Service SRC Collected | ${__________} |
| Large General Service SRC Collected | ${__________} |
| Lighting SRC Collected | ${__________} |
| Sub-Total of SRC Collected | ${__________} |
| **Total SRC Collected and Remitted** | ${__________} |
| Aggregate SRC Remittances for {__________ 20__} BILLING MONTH | ${__________} |
| Aggregate SRC Remittances for {__________ 20__} BILLING MONTH | ${__________} |
| Aggregate SRC Remittances for {__________ 20__} BILLING MONTH | ${__________} |
| **Total Current SRC Remittances** | ${__________} |

---

**Current BILLING MONTH:** {__/__/20__} - {__/__/20__}

Executed as of this {____} day of {__________} 20{__}.

---

| | |
|:---|:---|
| **Duke Energy Carolinas, LLC,** | **Duke Energy Carolinas, LLC,** |
| **as Servicer** | **as Servicer** |
| By: |  |
|  | Name: |
|  | Title: |

---

CC: DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC

EXHIBIT C

FORM OF SEMI-ANNUAL SERVICER'S CERTIFICATE

See attached

SEMI-ANNUAL SERVICER'S CERTIFICATE

Pursuant to <u>Section 4.01(c)(ii)</u> of the Storm Recovery Property Servicing Agreement, dated as of [Closing Date], 2025 (the "<u>Servicing Agreement</u>"), by and between **Duke Energy Carolinas, LLC**, as servicer (the "<u>Servicer</u>"), and **Duke Energy Carolinas NC Storm Funding II LLC**, the Servicer does hereby certify, for the {__________}, 20{__} Payment Date (the "<u>Current Payment Date</u>"), as follows:

Capitalized terms used but not defined herein have their respective meanings as set forth in the Servicing Agreement. References herein to certain sections and subsections are references to the respective sections of the Servicing Agreement or the Indenture, as the context indicates.

**Collection Periods:** {__________} to {__________}

**Payment Date:** {__________}, 20{__}

1. Collections Allocable and Aggregate Amounts Available for the Current Payment Date:

---

| | | |
|:---|:---|:---|
| i. | Remittances for the {__________} Collection Period | ${__________} |
| ii. | Remittances for the {__________} Collection Period | ${__________} |
| iii. | Remittances for the {__________} Collection Period | ${__________} |
| iv. | Remittances for the {__________} Collection Period | ${__________} |
| v. | Remittances for the {__________} Collection Period | ${__________} |
| vi | Remittances for the {__________} Collection Period | ${__________} |
| vii. | Investment Earnings on Capital Subaccount | ${__________} |
| viii. | Investment Earnings on Excess Funds Subaccount | ${__________} |
| ix. | Investment Earnings on General Subaccount | ${__________} |
| **x.** | **General Subaccount Balance (sum of i through viii above)** | ${__________} |
| xi. | Excess Funds Subaccount Balance as of prior Payment Date | ${__________} |
| **xii.** | **Capital Subaccount Balance as of prior Payment Date** | ${__________} |

---

**2.** Outstanding Amounts of as of prior Payment Date:

i. Storm Recovery [ ]
 {__} Outstanding Amount ${__________}

ii. Storm Recovery [ ] {__} Outstanding
 Amount ${__________}

iii. Storm Recovery [ ] {__} Outstanding
 Amount ${__________}

**vi.** **Aggregate Outstanding Amount of all Storm Recovery Bonds** ${__________}

**3.** Required Funding/Payments as of Current Payment Date:

---

| | | | |
|:---|:---|:---|:---|
|  | **Principal** |  | ***Principal Due*** |
| i. | Storm Recovery [ ] {__} | $| {__________} |
| ii. | Storm Recovery [ ] {__} | $| {__________} |
| iii. | Storm Recovery [ ] {__} | $| {__________} |
| **vi.** | **All Storm Recovery Bonds** | $| {__________} |
|  | &nbsp;&nbsp;&nbsp;**Interest** |  |  |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **[Tranche/Class]** | **[Tranche/Class]** | **Interest Rate** | **Days in Interest Period<sup>1</sup>** | **Principal Balance** | **Interest Due** |
| vii. | Storm Recovery [ ] {__} | {__}% | {_____} | ${__________} | ${________} |
| viii. | Storm Recovery [ ] {__} | {__}% | {_____} | ${__________} | ${________} |
| ix. | Storm Recovery [ ] {__} | {__}% | {_____} | ${__________} | ${________} |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| **xii.** | **All Storm Recovery Bonds** |  |  | $| {________} |
|  |  |  | **Required Level** |  | **Funding Required** |
| xiii. | Capital Subaccount | $| {__________} | $| {__________} |

---

**4.** Allocation of Remittances as of Current Payment Date Pursuant to 8.02(e) of Indenture:

i. Trustee Fees and Expenses; Indemnity Amounts ${__________}

ii. Servicing Fee ${__________}

iii. Administration Fee ${__________}

iv. Operating Expenses ${__________}

---

| | | | |
|:---|:---|:---|:---|
| Storm Recovery Bonds | Aggregate | Per $1,000 of Original<br> Principal Amount |  |
| v. Semi-Annual Interest (including any past-due for prior periods) |  | ${__________} |  |
| 1. Storm Recovery [ ] {__}Interest Payment | ${__________} | ${__________} |  |
| 2. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
| 3. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
|  | ${__________} |  |  |
| vi. Principal Due and Payable as a Result of an Event of Default or on Final Maturity Date |  |  | ${__________} |
| 1. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
| 2. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
| 3. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
|  | ${__________} |  |  |
| vii. Semi-Annual Principal |  |  | ${__________} |
| 1. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
| 2. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
| 3. Storm Recovery [ ] {__} Interest Payment | ${__________} | ${__________} |  |
|  | ${__________} |  |  |
| viii. Other unpaid Operating Expenses |  |  | ${__________} |
| ix. Funding of Capital Subaccount (to required level) |  |  | ${__________} |
| x. Capital Subaccount Return to Duke Energy Carolinas |  |  | ${__________} |
| xi. Deposit to Excess Funds Subaccount |  |  | ${__________} |
| xii. Released to Issuer upon Retirement of all Storm Recovery Bonds |  |  | ${__________} |
| xiii. Aggregate Remittances as of Current Payment Date |  |  | ${__________} |

---

<sup>1</sup>On 30/360 day basis for initial payment date; otherwise use one-half of annual rate.

5. Outstanding Amount and Collection Account Balance as of Current Payment Date (after giving effect to payments to be made on such Payment Date):

i. Storm Recovery [ ]
 {__} ${__________}

ii. Storm Recovery [ ] {__} ${__________}

iii. Storm Recovery [ ] {__} ${__________}

vi. Aggregate Outstanding Amount of all Storm
 Recovery Bonds ${__________}

vii. Excess Funds Subaccount Balance ${__________}

viii. Capital Subaccount Balance ${__________}

ix. Aggregate Collection Account Balance ${__________}

6. Subaccount Withdrawals as of Current Payment Date (if applicable, pursuant to Section 8.02(e) of Indenture):

i. Excess Funds Subaccount ${__________}

ii. Capital Subaccount ${__________}

iii. Total Withdrawals ${__________}

7. Shortfalls in Interest and Principal Payments as of Current Payment Date:

---

| | | |
|:---|:---|:---|
| i. | Semi-annual Interest |  |
|  | Storm Recovery [ ] {__} Interest Payment | ${__________} |
|  | Storm Recovery [ ] {__} Interest Payment | ${__________} |
|  | Storm Recovery [ ] {__} Interest Payment | ${__________} |
|  | Total | ${__________} |
| ii. | Semi-annual Principal |  |
|  | Storm Recovery [ ] {__} Principal Payment | ${__________} |
|  | Storm Recovery [ ] {__} Principal Payment | ${__________} |
|  | Storm Recovery [ ] {__} Principal Payment | ${__________} |
|  | Total | ${__________} |

---

8. Shortfalls in Payment of Return on Invested Capital as of Current Payment Date:

i. Return on Invested Capital ${__________}

9. Shortfalls in Required Subaccount Levels as of Current Payment Date:

i. Capital Subaccount ${__________}

IN WITNESS WHEREOF, the undersigned has duly executed and delivered this Semi-Annual Servicer's Certificate this {____} day of {__________}, 20{__}.

---

| | |
|:---|:---|
| **Duke Energy Carolinas, LLC,** | **Duke Energy Carolinas, LLC,** |
| **as Servicer** | **as Servicer** |
| By: |  |
|  | Name: |
|  | Title: |

---

EXHIBIT D

FORM OF SERVICER CERTIFICATE

See attached

SERVICER CERTIFICATE

The undersigned hereby certifies that the undersigned is the duly elected and acting {__________} of **DUKE ENERGY CAROLINAS, LLC**, as servicer (the "<u>Servicer</u>") under the Storm Recovery Property Servicing Agreement dated as of [Closing Date], 2025 (the "<u>Servicing Agreement</u>") by and between the Servicer and **DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC**, and further certifies that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The undersigned is responsible for assessing the Servicer's compliance with the servicing criteria set forth in Item 1122(d) of Regulation AB (the "<u>Servicing Criteria</u>").

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. With respect to each of the Servicing Criteria, the undersigned has made the following assessment of the Servicing Criteria in accordance with Item 1122(d) of Regulation AB, with such discussion regarding the performance of such Servicing Criteria during the fiscal year covered by the Depositor's annual report on Form 10-K:

---

| | | |
|:---|:---|:---|
| **Regulation AB<br> Reference** | **Servicing Criteria** | **Assessment** |
| **General Servicing Considerations** | **General Servicing Considerations** | **General Servicing Considerations** |
| &nbsp;&nbsp;1122(d)(1)(i) | &nbsp;&nbsp;Policies and procedures are instituted to monitor any performance or other triggers and events of default in accordance with the transaction agreements. | &nbsp;&nbsp;Applicable; assessment below. |
| &nbsp;&nbsp;1122(d)(1)(ii) | &nbsp;&nbsp;If any material servicing activities are outsourced to third parties, policies and procedures are instituted to monitor the third party's performance and compliance with such servicing activities. | &nbsp;&nbsp;Not applicable. |
| &nbsp;&nbsp;1122(d)(1)(iii) | &nbsp;&nbsp;Any requirements in the transaction agreements to maintain a back-up servicer for pool assets are maintained. | &nbsp;&nbsp;Not applicable; transaction agreements do not provide for a back-up servicer. |
| &nbsp;&nbsp;1122(d)(1)(iv) | &nbsp;&nbsp;A fidelity bond and errors and omissions policy is in effect on the party participating in the servicing function throughout the reporting period in the amount of coverage required by and otherwise in accordance with the terms of the transaction agreements. | &nbsp;&nbsp;Not applicable; transaction agreements do not require a fidelity bond or errors and omissions policy. |
| &nbsp;&nbsp;1122(d)(1)(v) | &nbsp;&nbsp;Aggregation of information, as applicable, is mathematically accurate and the information conveyed accurately reflects the information. | &nbsp;&nbsp;Applicable |
| **Cash Collection and Administration** | **Cash Collection and Administration** | **Cash Collection and Administration** |
| &nbsp;&nbsp;1122(d)(2)(i) | &nbsp;&nbsp;Payments on pool assets are deposited into the appropriate custodial bank accounts and related bank clearing accounts no more than two business days following receipt, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;Applicable. |

---

---

| | | |
|:---|:---|:---|
| **Regulation AB<br> Reference** | **Servicing Criteria** | **Assessment** |
| &nbsp;&nbsp;1122(d)(2)(ii) | &nbsp;&nbsp;Disbursements made via wire transfer on behalf of an obligor or to an investor are made only by authorized personnel. | &nbsp;&nbsp;Not applicable. |
| &nbsp;&nbsp;1122(d)(2)(iii) | &nbsp;&nbsp;Advances of funds or guarantees regarding collections, cash flows or distributions, and any interest or other fees charged for such advances, are made, reviewed and approved as specified in the transaction agreements. | &nbsp;&nbsp;Applicable; no advances by the Servicer are permitted under the transaction agreements, except for payments of certain indemnities. |
| &nbsp;&nbsp;1122(d)(2)(iv) | &nbsp;&nbsp;The related accounts for the transaction, such as cash reserve accounts or accounts established as a form of overcollateralization, are separately maintained (e.g., with respect to commingling of cash) as set forth in the transaction agreements. | &nbsp;&nbsp;Applicable, but no current assessment is required since the related accounts are maintained by the Indenture Trustee. |
| &nbsp;&nbsp;1122(d)(2)(v) | &nbsp;&nbsp;Each custodial account is maintained at a federally insured depository institution as set forth in the transaction agreements. For purposes of this criterion, "federally insured depository institution" with respect to a foreign financial institution means a foreign financial institution that meets the requirements of Rule 13k-1(b)(1) under the Exchange Act. | &nbsp;&nbsp;Applicable, but no current assessment required; all "custodial accounts" are maintained by the Indenture Trustee. |
| &nbsp;&nbsp;1122(d)(2)(vi) | &nbsp;&nbsp;Unissued checks are safeguarded so as to prevent unauthorized access. | &nbsp;&nbsp;Not applicable; all payments made by wire transfer. |
| &nbsp;&nbsp;1122(d)(2)(vii) | &nbsp;&nbsp;Reconciliations are prepared on a monthly basis for all asset-backed securities related bank accounts, including custodial accounts and related bank clearing accounts. These reconciliations are: (A) mathematically accurate; (B) prepared within 30 calendar days after the bank statement cutoff date, or such other number of days specified in the transaction agreements; (C) reviewed and approved by someone other than the person who prepared the reconciliation; and (D) contain explanations for reconciling items. These reconciling items are resolved within 90 calendar days of their original identification, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;Applicable; assessment below. |
| **Investor Remittances and Reporting** | **Investor Remittances and Reporting** | **Investor Remittances and Reporting** |
| &nbsp;&nbsp;1122(d)(3)(i) | &nbsp;&nbsp;Reports to investors, including those to be filed with the SEC, are maintained in accordance with the transaction agreements and applicable SEC requirements. Specifically, such reports: (A) are prepared in accordance with timeframes and other terms set forth in the transaction agreements; (B) provide information calculated in accordance with the terms specified in the transaction agreements; (C) are filed with the SEC as required by its rules and regulations; and (D) agree with investors' or the trustee's records as to the total unpaid principal balance and number of pool assets serviced by the servicer. | &nbsp;&nbsp;Applicable; assessment below. |

---

---

| | | |
|:---|:---|:---|
| **Regulation AB<br> Reference** | **Servicing Criteria** | **Assessment** |
| &nbsp;&nbsp;1122(d)(3)(ii) | &nbsp;&nbsp;Amounts due to investors are allocated and remitted in accordance with timeframes, distribution priority and other terms set forth in the transaction agreements. | &nbsp;&nbsp;Not applicable; investor records maintained by the Indenture Trustee. |
| &nbsp;&nbsp;1122(d)(3)(iii) | &nbsp;&nbsp;Disbursements made to an investor are posted within two business days to the servicer's investor records, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;Not applicable. |
| &nbsp;&nbsp;1122(d)(3)(iv) | &nbsp;&nbsp;Amounts remitted to investors per the investor reports agree with cancelled checks, or other form of payment, or custodial bank statements. | &nbsp;&nbsp;Applicable; assessment below. |
| **Pool Asset Administration** | **Pool Asset Administration** | **Pool Asset Administration** |
| &nbsp;&nbsp;1122(d)(4)(i) | &nbsp;&nbsp;Collateral or security on pool assets is maintained as required by the transaction agreements or related pool asset documents. | &nbsp;&nbsp;Applicable; assessment below. |
| &nbsp;&nbsp;1122(d)(4)(ii) | &nbsp;&nbsp;Pool assets and related documents are safeguarded as required by the transaction agreements. | &nbsp;&nbsp;Applicable; assessment below. |
| &nbsp;&nbsp;1122(d)(4)(iii) | &nbsp;&nbsp;Any additions, removals or substitutions to the asset pool are made, reviewed and approved in accordance with any conditions or requirements in the transaction agreements. | &nbsp;&nbsp;Not applicable; no removals or substitutions of Storm Recovery Property are contemplated or allowed under the transaction documents. |
| &nbsp;&nbsp;1122(d)(4)(iv) | &nbsp;&nbsp;Payments on pool assets, including any payoffs, made in accordance with the related pool asset documents are posted to the servicer's obligor records maintained no more than two business days after receipt, or such other number of days specified in the transaction agreements, and allocated to principal, interest or other items (e.g., escrow) in accordance with the related pool asset agreements. | &nbsp;&nbsp;Applicable; assessment below. |
| &nbsp;&nbsp;1122(d)(4)(v) | &nbsp;&nbsp;The servicer's records regarding the pool assets agree with the servicer's records with respect to an obligor's unpaid principal balance. | &nbsp;&nbsp;Not applicable; because underlying obligation (Storm Recovery Charge) is not an interest-bearing instrument. |
| &nbsp;&nbsp;1122(d)(4)(vi) | &nbsp;&nbsp;Changes with respect to the terms or status of an obligor's pool assets (e.g., loan modifications or re-agings) are made, reviewed and approved by authorized personnel in accordance with the transaction agreements and related pool asset documents. | &nbsp;&nbsp;Not Applicable. |
| &nbsp;&nbsp;1122(d)(4)(vii) | &nbsp;&nbsp;Loss mitigation or recovery actions (e.g., forbearance plans, modifications and deeds in lieu of foreclosure, foreclosures and repossessions, as applicable) are initiated, conducted and concluded in accordance with the timeframes or other requirements established by the transaction agreements. | &nbsp;&nbsp;Applicable; limited assessment below. Servicer actions governed by Commission regulations. |

---

---

| | | |
|:---|:---|:---|
| **Regulation AB<br> Reference** | **Servicing Criteria** | **Assessment** |
| &nbsp;&nbsp;1122(d)(4)(viii) | &nbsp;&nbsp;Records documenting collection efforts are maintained during the period a pool asset is delinquent in accordance with the transaction agreements. Such records are maintained on at least a monthly basis, or such other period specified in the transaction agreements, and describe the entity's activities in monitoring delinquent pool assets, including, for example, phone calls, letters and payment rescheduling plans in cases where delinquency is deemed temporary (e.g., illness or unemployment). | &nbsp;&nbsp;Applicable, but does not require assessment since no explicit documentation requirement with respect to delinquent accounts are imposed under the transaction agreements due to availability of "true-up" mechanism; and any such documentation is maintained in accordance with applicable North Carolina commission rules and regulations. |
| &nbsp;&nbsp;1122(d)(4)(ix) | &nbsp;&nbsp;Adjustments to interest rates or rates of return for pool assets with variable rates are computed based on the related pool asset documents. | &nbsp;&nbsp;Not applicable; Storm Recovery Charges are not interest-bearing instruments. |
| &nbsp;&nbsp;1122(d)(4)(x) | &nbsp;&nbsp;Regarding any funds held in trust for an obligor (such as escrow accounts): (A) such funds are analyzed, in accordance with the obligor's pool asset documents, on at least an annual basis, or such other period specified in the transaction agreements; (B) interest on such funds is paid, or credited, to obligors in accordance with applicable pool asset documents and state laws; and (C) such funds are returned to the obligor within 30 calendar days of full repayment of the related pool assets, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;Not applicable. |
| &nbsp;&nbsp;1122(d)(4)(xi) | &nbsp;&nbsp;Payments made on behalf of an obligor (such as tax or insurance payments) are made on or before the related penalty or expiration dates, as indicated on the appropriate bills or notices for such payments, provided that such support has been received by the servicer at least 30 calendar days prior to these dates, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;Not applicable; Servicer does not make payments on behalf of obligors. |
| &nbsp;&nbsp;1122(d)(4)(xii) | &nbsp;&nbsp;Any late payment penalties in connection with any payment to be made on behalf of an obligor are paid from the servicer's funds and not charged to the obligor, unless the late payment was due to the obligor's error or omission. | &nbsp;&nbsp;Not applicable; Servicer cannot make advances of its own funds on behalf of customers under the transaction agreements. |
| &nbsp;&nbsp;1122(d)(4)(xiii) | &nbsp;&nbsp;Disbursements made on behalf of an obligor are posted within two business days to the obligor's records maintained by the servicer, or such other number of days specified in the transaction agreements. | &nbsp;&nbsp;Not applicable; Servicer cannot make advances of its own funds on behalf of customers to pay principal or interest on the bonds. |
| &nbsp;&nbsp;1122(d)(4)(xiv) | &nbsp;&nbsp;Delinquencies, charge-offs and uncollectible accounts are recognized and recorded in accordance with the transaction agreements. | &nbsp;&nbsp;Applicable; assessment below. |
| &nbsp;&nbsp;1122(d)(4)(xv) | &nbsp;&nbsp;Any external enhancement or other support, identified in Item 1114(a)(1) through (3) or Item 1115 of Regulation AB, is maintained as set forth in the transaction agreements. | &nbsp;&nbsp;Not applicable; no external enhancement is required under the transaction agreements. |

---

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. To the best of the undersigned's knowledge, based on such review, the Servicer is in compliance in all material respects with the applicable servicing criteria set forth above as of and for the period ended the end of the fiscal year covered by the Issuer's annual report on Form 10-K. {If not true, include description of any material instance of noncompliance.}

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. {[ ], an independent registered public accounting firm, has issued an attestation report on the Servicer's assessment of compliance with the applicable servicing criteria as of and for the period ended the end of the fiscal year covered by the Issuer's annual report on Form 10-K.}

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. Capitalized terms used but not defined herein have their respective meanings as set forth in the Servicing Agreement.

Executed as of this {____} day of {__________}, 20{__}.

---

| | |
|:---|:---|
| **DUKE ENERGY CAROLINAS, LLC,** | **DUKE ENERGY CAROLINAS, LLC,** |
| **as Servicer** | **as Servicer** |
| By: |  |
|  | Name: |
|  | Title: |

---

EXHIBIT E

FORM OF CERTIFICATE OF COMPLIANCE

See attached

CERTIFICATE OF COMPLIANCE

The undersigned hereby certifies that the undersigned is the duly elected and acting {__________} of **DUKE ENERGY CAROLINAS, LLC**, as servicer (the "<u>Servicer</u>") under the Storm Recovery Property Servicing Agreement dated as of [Closing Date], 2025 (the "<u>Servicing Agreement</u>") by and between the Servicer and **DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC**, and further certifies that:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A review of the activities of the Servicer and of its performance under the Servicing Agreement during the twelve months ended {__________}, 20{__} has been made under the supervision of the undersigned pursuant to <u>Section 3.03</u> of the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. To the undersigned's knowledge, based on such review, the Servicer has fulfilled all of its obligations in all material respects under the Servicing Agreement throughout the twelve months ended {__________}, 20{__}, except as set forth on <u>EXHIBIT A</u> hereto.

Executed as of this {____} day of {__________}, 20{__}.

---

| | |
|:---|:---|
| **DUKE ENERGY CAROLINAS, LLC,** | **DUKE ENERGY CAROLINAS, LLC,** |
| **as Servicer** | **as Servicer** |
| By: |  |
|  | Name: |
|  | Title: |

---

EXHIBIT A<br> TO<br> CERTIFICATE OF COMPLIANCE

LIST OF SERVICER DEFAULTS

The following Servicer Defaults, or events that with the giving of notice, the lapse of time, or both, would become Servicer Defaults, known to the undersigned occurred during the twelve months ended {__________}, 20{__}:

<u>Nature of Default</u> <u>Status</u> <br> {__________} {__________}

EXHIBIT F

EXPECTED SINKING FUND SCHEDULE\*

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| | |
|:---|:---|
| Date | tranche |
| Closing Date |  |
| Total |  |

---

\* Totals may not add up due to rounding.

Outstanding Principal Balance Per Storm Recovery Bond

---

| | | | |
|:---|:---|:---|:---|
| Date | tranche | tranche | tranche |
| Closing Date |  |  |  |

---

## Exhibit 10.2

**Exhibit 10.2**

**STORM RECOVERY PROPERTY PURCHASE AND SALE AGREEMENT**

**by and between**

**DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, Issuer**

**and**

**Duke Energy Carolinas, LLC, Seller**

**Acknowledged and Accepted by**

**U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, as Indenture Trustee**

**Dated as of [Closing Date], 2025**

<u>**TABLE OF CONTENTS**</u>

---

| | | |
|:---|:---|:---|
|  |  | <u>Page</u> |
| ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION | ARTICLE I DEFINITIONS AND RULES OF CONSTRUCTION | &nbsp;&nbsp;&nbsp;&nbsp;1 |
| SECTION 1.01. | <u>Definitions and Rules of Construction</u> | 1 |
| ARTICLE II CONVEYANCE OF STORM RECOVERY PROPERTY | ARTICLE II CONVEYANCE OF STORM RECOVERY PROPERTY | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2 |
| SECTION 2.01. | <u>Conveyance of</u> Storm Recovery Property | 2 |
| SECTION 2.02. | <u>Conditions to Conveyance of Storm Recovery Property</u> | 2 |
| ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER | ARTICLE III REPRESENTATIONS AND WARRANTIES OF SELLER | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4 |
| SECTION 3.01. | <u>Organization and Good Standing</u> | 4 |
| SECTION 3.02. | <u>Due Qualification</u> | 4 |
| SECTION 3.03. | <u>Power and Authority</u> | 4 |
| SECTION 3.04. | <u>Binding Obligation</u> | 4 |
| SECTION 3.05. | <u>No Violation</u> | 4 |
| SECTION 3.06. | <u>No Proceedings</u> | 5 |
| SECTION 3.07. | <u>Approvals</u> | 5 |
| SECTION 3.08. | <u>The Storm Recovery Property</u> | 5 |
| SECTION 3.09. | <u>Limitations on Representations and Warranties</u> | 8 |
| ARTICLE IV COVENANTS OF THE SELLER | ARTICLE IV COVENANTS OF THE SELLER | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9 |
| SECTION 4.01. | <u>Existence</u> | 9 |
| SECTION 4.02. | <u>No Liens</u> | 9 |
| SECTION 4.03. | <u>Use of Proceeds</u> | 9 |
| SECTION 4.04. | <u>Delivery of Collections</u> | 9 |
| SECTION 4.05. | <u>Notice of Liens</u> | 9 |
| SECTION 4.06. | <u>Compliance with Law</u> | 9 |
| SECTION 4.07. | <u>Covenants Related to Storm Recovery Bonds and Storm Recovery Property</u> | 10 |
| SECTION 4.08. | <u>Protection of Title</u> | 11 |
| SECTION 4.09. | <u>Nonpetition Covenants</u> | 11 |
| SECTION 4.10. | <u>Taxes</u> | 12 |
| SECTION 4.11. | <u>Notice of Breach to Rating Agencies, Etc</u> | 12 |
| SECTION 4.12. | <u>Filing Requirements</u> | 12 |
| SECTION 4.13. | <u>Further Assurances</u> | 12 |
| SECTION 4.14. | <u>Intercreditor Agreements</u> | 12 |
| SECTION 4.15. | <u>Additional Sale of Storm Recovery Property</u> | 12 |
| ARTICLE V THE SELLER | ARTICLE V THE SELLER | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13 |
| SECTION 5.01. | Liability of Seller; Indemnities | 13 |
| SECTION 5.02. | <u>Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller</u> | 15 |
| SECTION 5.03. | <u>Limitation on Liability of Seller and Others</u> | 16 |

---

i

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| | | |
|:---|:---|:---|
| ARTICLE VI MISCELLANEOUS PROVISIONS | ARTICLE VI MISCELLANEOUS PROVISIONS | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16 |
| SECTION 6.01. | <u>Amendment</u> | 16 |
| SECTION 6.02. | <u>Notices</u> | 17 |
| SECTION 6.03. | <u>Assignment</u> | 18 |
| SECTION 6.04. | <u>Limitations on Rights of Third Parties</u> | 18 |
| SECTION 6.05. | <u>Severability</u> | 18 |
| SECTION 6.06. | <u>Separate Counterparts</u> | 18 |
| SECTION 6.07. | <u>Governing Law</u> | 19 |
| SECTION 6.08. | <u>Assignment to Indenture Trustee</u> | 19 |
| SECTION 6.09. | <u>Limitation of Liability</u> | 19 |
| SECTION 6.10. | <u>Waivers</u> | 19 |

---

EXHIBIT

Exhibit A Form of Bill of Sale

ii

This STORM RECOVERY PROPERTY PURCHASE AND SALE AGREEMENT, dated as of [Closing Date], 2025, is by and between DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC, a Delaware limited liability company, and Duke Energy CAROLINAS, LLC (the "Seller"), a North Carolina limited liability company, and acknowledged and accepted by U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association, as indenture trustee.

RECITALS

WHEREAS, the Issuer desires to purchase the Storm Recovery Property created pursuant to the Storm Recovery Law;

WHEREAS, the Seller is willing to sell its rights and interests under the Financing Order to the Issuer, whereupon such rights and interests will become the Storm Recovery Property;

WHEREAS, the Issuer, in order to finance the purchase of the Storm Recovery Property, will issue the Storm Recovery Bonds under the Indenture; and

WHEREAS, the Issuer, to secure its obligations under the Storm Recovery Bonds and the Indenture, will pledge, among other things, all right, title and interest of the Issuer in and to the Storm Recovery Property and this Sale Agreement to the Indenture Trustee for the benefit of the Secured Parties.

NOW, THEREFORE, in consideration of the premises and the mutual covenants herein contained, the parties hereto agree as follows:

ARTICLE I**<br> DEFINITIONS AND RULES OF CONSTRUCTION**

SECTION 1.01. <u>Definitions and Rules of Construction</u>. Capitalized terms used but not otherwise defined in this Sale Agreement shall have the respective meanings given to such terms in <u>Appendix A</u> of the Indenture, which is hereby incorporated by reference into this Sale Agreement as if set forth fully in this Sale Agreement. Not all terms defined in <u>Appendix A</u> are used in this Sale Agreement. The rules of construction set forth in <u>Appendix A</u> shall apply to this Sale Agreement and are hereby incorporated by reference into this Sale Agreement as if set forth fully in this Sale Agreement, however for purposes of this Sale Agreement, unless otherwise indicated herein, the terms Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property mean the Storm Recovery Charges, Closing Date, Storm Recovery Collateral and Storm Recovery Property for the Storm Recovery Bonds.

ARTICLE II**<br> CONVEYANCE OF STORM RECOVERY PROPERTY**

SECTION 2.01. <u>Conveyance of</u> Storm Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) In consideration of the Issuer's delivery to or upon the order of the Seller of $[ ], subject to the conditions specified in <u>Section 2.02</u>, the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth herein, all right, title and interest of the Seller in, to and under the Storm Recovery Property (such sale, transfer, assignment, setting over and conveyance of the Storm Recovery Property includes, to the fullest extent permitted by the Storm Recovery Law and the North Carolina UCC, the assignment of all revenues, collections, claims, rights to payments, payments, money or proceeds arising from the rights and interests specified in the Financing Order, including the right to impose, bill, charge, collect, and receive Storm Recovery Charges related to the Storm Recovery Property, as the same may be adjusted from time to time pursuant to the formula-based adjustment mechanism authorized under the Storm Recovery Law). Such sale, assignment, or other absolute transfer of the Storm Recovery Property or other absolute transfer is hereby expressly stated to be a sale or other absolute transfer and, pursuant to N.C. Gen. Stat. § 62-172(e)(3), shall be treated as an absolute transfer and true sale and not as a pledge of or secured transaction relating to the Seller's right, title, and interest in, to, and under the Storm Recovery Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in, to or under the Storm Recovery Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Storm Recovery Property to the Issuer, (ii) as provided in N.C. Gen. Stat. § 62-172(e)(3), all right, title and interest shall have passed to the Issuer and (iii) as provided in N.C. Gen. Stat. § 62-172(e)(3)d., appropriate financing statements shall have been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as provided in N.C. Gen. Stat. § 62-172(e)(3), then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Storm Recovery Property and as the creation of a security interest (within the meaning of the Storm Recovery Law and the UCC) in the Storm Recovery Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Storm Recovery Property to the Issuer, the Seller hereby grants a security interest in the Storm Recovery Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the Storm Recovery Charges and all other Storm Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Section 2.02</u>, the Issuer does hereby purchase the Storm Recovery Property from the Seller for the consideration set forth in <u>Section 2.01(a)</u>.

SECTION 2.02. <u>Conditions to Conveyance of Storm Recovery Property</u>. The obligation of the Seller to sell, and the obligation of the Issuer to purchase, Storm Recovery Property on the Closing Date shall be subject to the satisfaction or waiver of each of the following conditions:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) on or prior to the Closing Date, the Seller shall have delivered to the Issuer a duly executed Bill of Sale identifying and conveying the Storm Recovery Property on the Closing Date;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) on or prior to the Closing Date, the Seller shall have obtained the Financing Order creating the Storm Recovery Property;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) as of the Closing Date, the Seller is not insolvent and will not have been made insolvent by such sale and the Seller is not aware of any pending insolvency with respect to itself;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) as of the Closing Date, (i) the representations and warranties of the Seller in this Sale Agreement must be true and correct with the same force and effect as if made on that date (except to the extent they relate to an earlier date), (ii) on and as of the Closing Date no breach of any covenant or agreement of the Seller contained in this Sale Agreement has occurred and is continuing and (iii) no Servicer Default shall have occurred and be continuing;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) as of the Closing Date, (i) the Issuer shall have sufficient funds available to pay the purchase price for the Storm Recovery Property to be conveyed on such date and (ii) all conditions to the issuance of the Storm Recovery Bonds intended to provide such funds set forth in the Indenture and the applicable Series Supplement shall have been satisfied or waived;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) the Seller shall have received and delivered to the Rating Agencies and the Issuer any Opinions of Counsel required by the Rating Agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) the Seller shall have received and delivered to the Issuer and the Indenture Trustee an opinion or opinions of outside tax counsel (as selected by the Seller, and in form and substance reasonably satisfactory to the Issuer) to the effect that (i) the Issuer will not be subject to U.S. federal income tax as an entity separate from its sole owner and that the Storm Recovery Bonds will be treated as debt of the Issuer's sole owner for U.S. federal income tax purposes and (ii) for U.S. federal income tax purposes, the issuance of the Storm Recovery Bonds will not result in gross income to the Seller;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) on and as of the Closing Date, each of the Certificate of Formation, the LLC Agreement, the Servicing Agreement, this Sale Agreement, the Intercreditor Agreements, the Indenture, the Series Supplement, the Financing Order and the Storm Recovery Law shall be in full force and effect;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) the Storm Recovery Bonds shall have received the highest credit ratings possible, as evidenced by a certification from the Seller;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) the Seller shall have delivered to the Indenture Trustee, and the Issuer an Officer's Certificate confirming the satisfaction of each condition precedent specified in this <u>Section 2.02</u>; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) the Seller shall have received the purchase price for the Storm Recovery Property.

ARTICLE III**<br> REPRESENTATIONS AND WARRANTIES OF SELLER**

Subject to <u>Section 3.09</u>, the Seller makes the following representations and warranties, as of the Closing Date, and the Seller acknowledges that the Issuer has relied thereon in acquiring the Storm Recovery Property. The representations and warranties shall survive the sale and transfer of Storm Recovery Property to the Issuer and the pledge thereof to the Indenture Trustee pursuant to the Indenture. The Seller agrees that (i) the Issuer may assign the right to enforce the following representations and warranties to the Indenture Trustee and (ii) the following representations and warranties inure to the benefit of the Issuer and the Indenture Trustee.

SECTION 3.01. <u>Organization and Good Standing</u>. The Seller is a limited liability company duly organized, validly existing and in good standing under the laws of the state of North Carolina, with requisite power and authority to own its properties and conduct its business as of the Closing Date.

SECTION 3.02. <u>Due Qualification</u>. The Seller is duly qualified to do business and is in good standing, and has obtained all necessary licenses and approvals, in all jurisdictions in which the ownership or lease of property or the conduct of its business shall require such qualifications, licenses or approvals (except where the failure to so qualify or obtain such licenses and approvals would not be reasonably likely to have a material adverse effect on the Seller's business, operations, assets, revenues or properties, the Storm Recovery Property, the Issuer or the Storm Recovery Bonds).

SECTION 3.03. <u>Power and Authority</u>. The Seller has the requisite power and authority to execute and deliver this Sale Agreement and to carry out its terms. The Seller has full power and authority to own the Storm Recovery Property and to sell and assign the Storm Recovery Property to the Issuer and the Seller has duly authorized such sale and assignment to the Issuer by all necessary action. The execution, delivery and performance of obligations under this Sale Agreement have been duly authorized by all necessary action on the part of the Seller under its organizational documents and laws.

SECTION 3.04. <u>Binding Obligation</u>. This Sale Agreement constitutes a legal, valid and binding obligation of the Seller, enforceable against the Seller in accordance with its terms, subject to bankruptcy, receivership, insolvency, reorganization, moratorium or other laws affecting creditors' rights generally from time to time in effect and to general principles of equity, regardless of whether considered in a proceeding in equity or at law.

SECTION 3.06. <u>No Proceedings</u>. There are no proceedings or, to the Seller's knowledge, investigations pending or proceedings threatened, before any Governmental Authority having jurisdiction over the Seller or its properties: (a) asserting the invalidity of the Basic Documents, the Storm Recovery Bonds, the Storm Recovery Law or the Financing Order; (b) seeking to prevent the issuance of the Storm Recovery Bonds or the consummation of any of the transactions contemplated by the Basic Documents; (c) seeking a determination or ruling that could reasonably be expected to materially and adversely affect the performance by the Seller of its obligations under, or the validity or enforceability of, the Basic Documents, the Storm Recovery Bonds or the Financing Order; or (d) challenging the Seller's treatment of the Storm Recovery Bonds as debt of the Seller for U.S. federal income tax purposes.

SECTION 3.07. <u>Approvals</u>. No governmental approvals, authorizations, consents, orders or other actions or filings, other than filings under the Storm Recovery Law or with the Secretary of State of the State of North Carolina or Delaware UCC, are required for the Seller to execute, deliver and perform its obligations under this Sale Agreement except those which have previously been obtained or made or are required to be made by the Servicer in the future pursuant to the Servicing Agreement.

SECTION 3.08. <u>The Storm Recovery Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) <u>Information</u>. Subject to <u>Section 3.08(h)</u>, at the Closing Date, all written information, as amended or supplemented from time to time, provided by the Seller to the Issuer with respect to the Storm Recovery Property (including the Expected Sinking Fund Schedule and the Financing Order) is true and correct in all material respects and does not omit any material facts and all historical data for the purpose of calculating the initial storm recovery charges in the issuance advice letter and initial routine true-up adjustment request are true and correct, and the assumptions used for such calculations are reasonable and made in good faith.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>True-Sale and Absolute Transfer</u>. The transfer, sale, assignment and conveyance of the Storm Recovery Property constitutes a sale or other absolute transfer of all of the Seller's right, title and interest in the Storm Recovery Property to the Issuer; upon the execution and delivery of this Sale Agreement and the Bill of Sale on the Closing Date, the Storm Recovery Property shall be validly transferred and sold to the Issuer and the Seller will have no right, title or interest in the Storm Recovery Property and the Storm Recovery Property would not be part of the estate of the Seller as debtor in the event of a filing of a bankruptcy petition by or against the Seller under any bankruptcy law. The Seller hereby represents that no portion of the Storm Recovery Property has been sold, transferred, assigned, pledged or otherwise conveyed by the Seller to any person other than the Issuer, and, to the Seller's knowledge (after due inquiry), no security agreement, financing statement or equivalent security or lien instrument listing the Seller as debtor covering all or a portion of the Storm Recovery Property is on file or of record in any jurisdiction, except such as may have been filed or recorded in favor of the Issuer or the Indenture Trustee in connection with the Basic Documents.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) <u>Financing Order; Other Approvals</u>. On the Closing Date, under the laws of the State of North Carolina (including the Storm Recovery Law) and the United States in effect on the Closing Date: (i) The Financing Order has been issued by the Commission in accordance with the Storm Recovery Law, and such order and the process by which it was issued comply with all applicable laws, rules and regulations. The Financing Order has become effective pursuant to the Storm Recovery Law and is, and as of the date of issuance of the Storm Recovery Bonds will be, in full force and effect and final and non-appealable; (ii) the Storm Recovery Bonds will be entitled to the protections provided by the Storm Recovery Law and, accordingly, the Financing Order and the Storm Recovery Charges are irrevocable and not subject to reduction by the Commission, except for the True-Up Adjustments to the Storm Recovery Charges provided for in the Financing Order; (iii) revisions to Duke Energy Carolinas's electric tariff to implement the Storm Recovery Charges have been filed and are in full force and effect, such revisions are consistent with the Financing Order, and any electric tariff implemented consistent with a Financing Order issued by the Commission is not subject to modification by the Commission except for True-Up Adjustments made in accordance with the Storm Recovery Law; (iv) the process by which the Financing Order was adopted and approved complies with all applicable laws, rules and regulations; and (v) no other approvals, authorizations, consents, orders or other actions or filings, other than filings under the Storm Recovery Law or the UCC of North Carolina or Delaware, are required for the Seller to execute, deliver and perform its obligations under this Sale Agreement except those which have previously been obtained or made or are required to be made by the Servicer in the future pursuant to the Servicing Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) <u>State Action</u>. Under the Storm Recovery Law, the State of North Carolina and its agencies, including the Commission, may not take or permit any action that would impair the value of the Storm Recovery Property or the Storm Recovery Collateral or, except for the True-Up Adjustment, reduce, alter, or impair the Storm Recovery Charges to be imposed, charged, collected and remitted to the Issuer, for the benefit of the Holders of the Storm Recovery Bonds until the principal, interest or other charges incurred or contracts to be performed in connection with the Storm Recovery Bonds are paid or performed in full. Furthermore, under the Contract Clause of the United States Constitution, any action taken by the State of North Carolina, including the Commission that substantially impairs the rights of the Holders of the Storm Recovery Bonds should be found by a court of competent jurisdiction to be an impairment of contract with respect to the State Pledge, unless such action is a reasonable exercise of the State of North Carolina's sovereign powers and of a character reasonable and appropriate to further a significant and legitimate public purpose. Under the Takings Clause of the United States Constitution and the Law of the Land Clause of the North Carolina Constitution, the State of North Carolina should be required to pay just compensation to the Holders if a court of competent jurisdiction determines that a repeal or amendment of the Storm Recovery Law or any other action taken by the State of North Carolina in contravention of the State Pledge, (a) constitutes a permanent appropriation of a substantial property interest of the Holders in the Storm Recovery Property or (b) substantially impairs the value of the Storm Recovery Property so as to unduly interfere with the reasonable expectations of the Holders arising from their investment in the Storm Recovery Bonds, unless such court finds that just compensation has been provided to the Holders of the Storm Recovery Bonds. Nothing in this paragraph precludes any limitation or alteration if full compensation is made by law for the full protection of the Storm Recovery Charges and of the Holders of the Storm Recovery Bonds or any assignee or party entering into a contract with the Seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) <u>No Repeal of the Storm Recovery Law</u>. Apart from amending the Constitution of the State of North Carolina by initiative, the voters of the State of North Carolina do not have initiative powers to amend, repeal or revoke the Storm Recovery Law.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) <u>Tax Liens</u>. After due inquiry, the Seller is not aware of any judgment or tax lien filing against the Issuer or the Seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) <u>Assumptions</u>. On the Closing Date, based upon the information available to the Seller on such date, the assumptions used in calculating the Storm Recovery Charges are reasonable and are made in good faith. Notwithstanding the foregoing, the Seller makes no representation or warranty, express or implied, that amounts actually collected arising from those Storm Recovery Charges will in fact be sufficient to meet the payment obligations on the Storm Recovery Bonds or that the assumptions used in calculating such Storm Recovery Charges will in fact be realized.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) <u>Creation of Storm Recovery Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) For purposes of the Storm Recovery Law, the Storm Recovery Property constitutes a present property right that will continue to exist until the Storm Recovery Bonds issued pursuant to the Financing Order are paid in full and all Financing Costs of the Storm Recovery Bonds have been recovered in full; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) the Storm Recovery Property consists of (A) all rights and interest of the Seller under the Financing Order, including the right to impose, bill, charge, collect and receive Storm Recovery Charges; (B) the right under the Financing Order to obtain True-Up Adjustments of the Storm Recovery Charges; and (C) all revenues, collections, claims, rights to payments, payments, money and proceeds arising out of the rights and interests described in (A) and (B).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) <u>Nature of Representations and Warranties</u>. The representations and warranties set forth in this <u>Section 3.08</u>, insofar as they involve conclusions of law, are made not on the basis that the Seller purports to be a legal expert or to be rendering legal advice, but rather to reflect the parties' good faith understanding of the legal basis on which the parties are entering into this Sale Agreement and the other Basic Documents and the basis on which the Holders are purchasing the Storm Recovery Bonds, and to reflect the parties' agreement that, if such understanding turns out to be incorrect or inaccurate, the Seller will be obligated to indemnify the Issuer and their permitted assigns (to the extent required by and in accordance with <u>Section 5.01</u>), and that the Issuer and their permitted assigns will be entitled to enforce any rights and remedies under the Basic Documents on account of such inaccuracy to the same extent as if the Seller had breached any other representations or warranties hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(k) <u>Prospectus</u>. As of the date hereof, the information describing the Seller under the caption "DEC's Review of Storm Recovery Property" and "Duke Energy Carolinas, LLC–The Depositor, Sponsor, Seller and Servicer" in the prospectus dated [ ], 2025 relating to the Storm Recovery Bonds is true and correct in all material respects.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(l) <u>Solvency</u>. After giving effect to the sale of the Storm Recovery Property hereunder, the Seller:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) is solvent and expects to remain solvent;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) is adequately capitalized to conduct its business and affairs considering its size and the nature of its business and intended purpose;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) is not engaged in nor does it expect to engage in a business for which its remaining property represents unreasonably small capital;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) reasonably believes that it will be able to pay its debts as they come due; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) is able to pay its debts as they mature and does not intend to incur, or believes that it will not incur, indebtedness that it will not be able to repay at its maturity.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(m) <u>No Court Order</u>. There is no order by any court providing for the revocation, alteration, limitation or other impairment of the Storm Recovery Law, the Financing Order, the Storm Recovery Property or the Storm Recovery Charges or any rights arising under any of them or that seeks to enjoin the performance of any obligations under the Financing Order which is adverse to the position of the related Holders of Storm Recovery Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(n) <u>Survival of Representations and Warranties</u> The representations and warranties set forth in this <u>Section 3.08</u> shall survive the execution and delivery of this Sale Agreement and may not be waived by any party hereto except pursuant to a written agreement executed in accordance with <u>Article VI</u> and as to which the Rating Agency Condition has been satisfied.

SECTION 3.09. <u>Limitations on Representations and Warranties</u>. Without prejudice to any of the other rights of the parties, the Seller will not be in breach of any representation or warranty as a result of a change in law by means of any legislative enactment, constitutional amendment or voter initiative. **Notwithstanding anything in this Sale Agreement to the contrary, the Seller makes no representation that amounts collected will be sufficient to meet the obligations on the Storm Recovery Bonds.**

ARTICLE IV**<br> COVENANTS OF THE SELLER**

SECTION 4.01. <u>Existence</u>. Subject to <u>Section 5.02</u>, so long as any of the Storm Recovery Bonds are Outstanding, the Seller (a) will keep in full force and effect its existence and remain in good standing or equivalent status under the laws of the jurisdiction of its organization and (b) will obtain and preserve its qualifications to do business in each jurisdiction in which such qualification is or will be necessary to protect the validity and enforceability of this Sale Agreement and each other instrument or agreement to which the Seller is a party necessary to the proper administration of this Sale Agreement and the transactions contemplated thereby.

SECTION 4.02. <u>No Liens</u>. Except for the conveyances under this Sale Agreement or any Lien for the benefit of the Issuer, the Holders of the Storm Recovery Bonds or the Indenture Trustee, the Seller will not sell, pledge, assign or transfer to any other person, or grant, create, incur, assume or suffer to exist any Lien on, any of the Storm Recovery Property, whether existing as of the transfer date or thereafter created, or any interest therein. The Seller will not at any time assert any Lien against or with respect to any Storm Recovery Property, and will defend the right, title and interest of the Issuer and of the Indenture Trustee, on behalf of the Secured Parties, in, to and under the Storm Recovery Property against all claims of third parties claiming through or under the Seller.

SECTION 4.03. <u>Use of Proceeds</u>. The Seller will use the proceeds of the sale of the Storm Recovery Property in accordance with the Financing Order.

SECTION 4.04. <u>Delivery of Collections</u>. In the event that the Seller receives any Storm Recovery Charge Collections or other payments in respect of the Storm Recovery Charges or the proceeds thereof, other than in its capacity as the Servicer, the Seller agrees to pay to the Servicer, on behalf of the Issuer, all payments received by it in respect thereof as soon as practicable after receipt thereof by the Seller, but in no event later than two Business Days after the Seller becomes aware of such receipt.

SECTION 4.05. <u>Notice of Liens</u>. The Seller shall notify the Issuer and the Indenture Trustee, in writing, promptly after becoming aware of any Lien on any of the Storm Recovery Property, other than the conveyances hereunder and any Lien pursuant to the Basic Documents, including the Lien in favor of the Indenture Trustee for the benefit of the Holders of the Storm Recovery Bonds.

SECTION 4.06. <u>Compliance with Law</u>. The Seller will materially comply with its organizational or governing documents and all laws, treaties, rules, regulations and determinations of any Governmental Authority applicable to it, except to the extent that failure to so comply would not materially adversely affect the Issuer's or the Indenture Trustee's interests in the Storm Recovery Property under any of the Basic Documents, the timing or amount of Storm Recovery Charges payable by Customers or of Seller's performance of its material obligations under this Sale Agreement.

SECTION 4.07. <u>Covenants Related to Storm Recovery Bonds and Storm Recovery Property</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall treat the Storm Recovery Property as the Issuer's property for all purposes other than financial accounting, U.S. federal income tax purposes and state income and franchise tax purposes.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall treat such Storm Recovery Bonds as debt of the Issuer and not that of the Seller, except for financial accounting and U.S. federal income tax purposes. For U.S. federal income tax purposes, so long as any of the Storm Recovery Bonds are Outstanding, the Seller agrees to treat such Storm Recovery Bonds as indebtedness of the Seller (as the sole owner of the Issuer) secured by the related Storm Recovery Collateral unless otherwise required by appropriate taxing authorities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall disclose in its financial statements that the Issuer and not the Seller is the owner of the Storm Recovery Property and that the assets of the Issuer are not available to pay creditors of the Seller or its Affiliates (other than the Issuer).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) So long as any of the Storm Recovery Bonds are Outstanding, the Seller shall not own or purchase any other storm recovery bonds of the Issuer.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) So long as the Storm Recovery Bonds are Outstanding, the Seller shall disclose the effects of all transactions between the Seller and the Issuer in accordance with generally accepted accounting principles.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Seller agrees that, upon the sale by the Seller of the Storm Recovery Property to the Issuer pursuant to this Sale Agreement, (i) to the fullest extent permitted by law, including applicable Commission Regulations and the Storm Recovery Law, the Issuer shall have all of the rights originally held by the Seller with respect to the Storm Recovery Property, including the right (subject to the terms of the Servicing Agreement) to exercise any and all rights and remedies to collect any amounts payable by any Customer in respect of the Storm Recovery Property, notwithstanding any objection or direction to the contrary by the Seller (and the Seller agrees not to make any such objection or to take any such contrary action) and (ii) any payment by any Customer directly to the Issuer shall discharge such Customer's obligations, if any, in respect of the Storm Recovery Property to the extent of such payment, notwithstanding any objection or direction to the contrary by the Seller.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) So long as any of the Storm Recovery Bonds are Outstanding, (i) in all proceedings relating directly or indirectly to the Storm Recovery Property, the Seller shall affirmatively certify and confirm that it has sold all of its rights and interests in and to such property (other than for financial accounting or tax purposes), (ii) the Seller shall not make any statement or reference in respect of the Storm Recovery Property that is inconsistent with the ownership interest of the Issuer (other than for financial accounting or tax purposes), (iii) the Seller shall not take any action in respect of the Storm Recovery Property except solely in its capacity as the Servicer thereof pursuant to the Servicing Agreement or as otherwise contemplated by the Basic Documents, and (iv) neither the Seller nor the Issuer shall take any action, file any tax return or make any election inconsistent with the treatment of the Issuer, for U.S. federal income tax purposes and, to the extent consistent with applicable state tax law, state income and franchise tax purposes, as a disregarded entity that is not separate from the Seller (or, if relevant, from another sole owner of the Issuer).

SECTION 4.08. <u>Protection of Title</u>. The Seller shall execute and file such filings, including filings with the Secretary of State of the State of North Carolina pursuant to the Storm Recovery Law, and cause to be executed and filed such filings, all in such manner and in such places as may be required by law to fully preserve, maintain, protect and perfect the ownership interest of the Issuer, and the back-up precautionary security interest of the Issuer pursuant to <u>Section 2.01</u>, and the first priority security interest of the Indenture Trustee in the Storm Recovery Property, including all filings (including but not limited to continuation statements) required under the Storm Recovery Law and the UCC relating to the transfer of the ownership of the rights and interest in the Storm Recovery Property by the Seller to the Issuer or the pledge of the Issuer's interest in the Storm Recovery Property to the Indenture Trustee. The Seller shall deliver or cause to be delivered to the Issuer and the Indenture Trustee file-stamped copies of, or filing receipts for, any document filed as provided above, as soon as available following such filing. The Seller shall institute any action or proceeding necessary to compel performance by the Commission, the State of North Carolina or any of their respective agents of any of their obligations or duties under the Storm Recovery Law, the Financing Order, or any issuance advice letter for the Storm Recovery Bonds and the Seller agrees to take such legal or administrative actions, including defending against or instituting and pursuing legal actions and appearing or testifying at hearings or similar proceedings, in each case as may be reasonably necessary (a) to seek to protect the Issuer and the Secured Parties from claims, state actions or other actions or proceedings of third parties that, if successfully pursued, would result in a breach of any representation set forth in <u>Article III</u> or any covenant set forth in <u>Article IV</u> and (b) to seek to block or overturn any attempts to cause a repeal of, modification of or supplement to the Storm Recovery Law, the Financing Order or any issuance advice letter for the Storm Recovery Bonds, or the rights of Holders of the Storm Recovery Bonds by legislative enactment or constitutional amendment that would be materially adverse to the Issuer or the Secured Parties or that would otherwise cause an impairment of the rights of the Issuer or the Secured Parties. The costs of any such actions or proceedings undertaken by the Seller will be reimbursed by the Issuer as an Operating Expense.

SECTION 4.09. <u>Nonpetition Covenants</u>. Notwithstanding any prior termination of this Sale Agreement or the Indenture, the Seller shall not, prior to the date that is one year and one day after the termination of the Indenture and payment in full of the Storm Recovery Bonds or any other amounts owed under the Indenture, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any Governmental Authority for the purpose of commencing or sustaining a voluntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law, appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official or any substantial part of the property of the Issuer, or ordering the winding up or liquidation of the affairs of the Issuer.

SECTION 4.10. <u>Taxes</u>. So long as any of the Storm Recovery Bonds are outstanding, the Seller shall, and shall cause each of its Affiliates (including the Issuer) to, pay all material taxes, assessments and governmental charges imposed upon it or any of its properties or assets or with respect to any of its franchises, business, income or property before any penalty accrues thereon if the failure to pay any such taxes, assessments and governmental charges would, after any applicable grace periods, notices or other similar requirements, result in a Lien on the Storm Recovery Property; <u>provided</u>, that no such tax need be paid if the Seller or one of its Affiliates is contesting the same in good faith by appropriate proceedings promptly instituted and diligently conducted and if the Seller or such Affiliate has established appropriate reserves as shall be required in conformity with generally accepted accounting principles.

SECTION 4.11. <u>Notice of Breach to Rating Agencies, Etc.</u> Promptly after obtaining knowledge thereof, in the event of a breach in any material respect (without regard to any materiality qualifier contained in such representation, warranty or covenant) of any of the Seller's representations, warranties or covenants contained herein, the Seller shall promptly notify the Issuer, the Indenture Trustee, the Commission and the Rating Agencies, in writing, of such breach. For the avoidance of doubt, any breach that would adversely affect scheduled payments on the Storm Recovery Bonds will be deemed to be a material breach for purposes of this <u>Section 4.11</u>.

SECTION 4.12. <u>Filing Requirements</u>. The Seller shall comply with all filing requirements, including any post-closing filings, in accordance with the Financing Order.

SECTION 4.13. <u>Further Assurances</u>. Upon the request of the Issuer, the Seller shall execute and deliver such further instruments and do such further acts as may be reasonably necessary to carry out more effectively the provisions and purposes of this Sale Agreement with notice to the Commission and Public Staff as provided in <u>Section 6.02,</u> provided, however, that the delivery of such notice shall not delay the implementation of any instrument delivered in accordance with this Section.

SECTION 4.14. <u>Intercreditor Agreements</u>. The Seller shall not continue as or become a party to any (i) trade receivables purchase and sale agreement or similar arrangement under which it sells all or any portion of its accounts receivables owing from North Carolina electric distribution customers unless the Indenture Trustee, the Seller and the other parties to such additional arrangement shall have entered into a joinder or amendment to the Intercreditor Agreements in connection therewith and the terms of the documentation evidencing such trade receivables purchase and sale arrangement or similar arrangement shall expressly exclude Storm Recovery Property (including Storm Recovery Charges) from any receivables or other assets pledged or sold under such arrangement or (ii) sale agreement selling to any other Affiliate property consisting of charges similar to the Storm Recovery Charges sold pursuant to this Sale Agreement, payable by Customers pursuant to the Storm Recovery Law or any similar law, unless the Seller and the other parties to such arrangement shall have entered into a joinder or amendment to the Intercreditor Agreements in connection with any agreement or similar arrangement described in this <u>Section 4.14</u>.

SECTION 4.15. <u>Additional Sale of Storm Recovery Property</u>. So long as any of the Storm Recovery Bonds are outstanding, the Seller shall not sell any "storm recovery property" (as defined in the Storm Recovery Law) or similar property, to secure another issuance of storm recovery bonds or similar bonds unless the Rating Agency Condition has been satisfied. In the case of a subsequent conveyance of storm recovery property only, on or prior to the issuance date, the Seller shall provide the Issuer and the Rating Agencies with a timely additional notice.

ARTICLE V**<br> THE SELLER**

SECTION 5.01. Liability of Seller; Indemnities.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) The Seller shall be liable in accordance herewith only to the extent of the obligations specifically undertaken by the Seller under this Sale Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Seller shall indemnify the Issuer and the Indenture Trustee (for itself and the benefit of the Holders of the Storm Recovery Bonds) and each of their respective officers, directors, employees, trustees, managers, including the Independent Manager, and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Storm Recovery Bond) that may at any time be imposed on or asserted against any such Person as a result of the sale and assignment of the Storm Recovery Property to the Issuer, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Storm Recovery Bond, it being understood that the Holders of Storm Recovery Bonds shall be entitled to enforce their rights against the Seller under this <u>Section 5.01(b)</u> solely through a cause of action brought for their benefit by the Indenture Trustee as set forth in the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Seller shall indemnify the Issuer and the Indenture Trustee (for itself and the benefit of the Holders of the Storm Recovery Bonds) and each of their respective officers, directors, employees, trustees, managers and agents for, and defend and hold harmless each such Person from and against, any and all taxes (other than taxes imposed on Holders as a result of their ownership of a Storm Recovery Bond) that may at any time be imposed on or asserted against any such Person as a result of the Issuer's ownership and assignment of the Storm Recovery Property, the issuance and sale by the Issuer of the Storm Recovery Bonds or the other transactions contemplated in the Basic Documents, including any franchise, sales, gross receipts, general corporation, tangible personal property, privilege or license taxes, but excluding any taxes imposed as a result of a failure of such Person to withhold or remit taxes with respect to payments on any Storm Recovery Bond.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Indemnification under <u>Sections 5.01(b)</u>, <u>5.01(c)</u>, <u>5.01(d)</u> and <u>5.01(e)</u> shall include reasonable out-of-pocket fees and expenses of investigation and litigation (including reasonable attorneys' fees and expenses), except as otherwise expressly provided in this Sale Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) The Seller shall indemnify the Issuer and the Indenture Trustee (for itself and for the benefit of the Holders of the Storm Recovery Bonds), and each of the Issuer's and the Indenture Trustee's respective officers, directors, managers, employees and agents (each, an "Indemnified Person") for, and defend and hold harmless each such Person from and against, (i) any and all amounts of principal of and interest on the Storm Recovery Bonds not paid when due or when scheduled to be paid in accordance with their terms and the amount of any deposits to the Issuer required to have been made in accordance with the terms of the Basic Documents which are not made when so required, in each case as a result of the Seller's breach of any of its representations, warranties or covenants contained in this Sale Agreement, and (ii) any and all Losses that may be imposed on or asserted against any such Person, other than any liabilities, obligations or claims for or payments of principal of or interest on the Storm Recovery Bonds, together with any reasonable costs and expenses actually incurred by such Person, as a result of the Seller's material breach of any of its representations, warranties or covenants contained in this Sale Agreement, except to the extent of Losses either resulting from the willful misconduct, bad faith or gross negligence of such Indemnified Person or resulting from a breach of a representation or warranty made by such Indemnified Person in any of the Basic Documents that gives rise to Seller's breach, and provided that, with respect to a material breach of a representation, warranty or covenant, the Seller has first had a 30-day opportunity to cure such breach beginning with the receipt of a notice of breach from the Issuer or the Indenture Trustee and has failed to cure such breach within such period; and provided further that the Holders of the Storm Recovery Bonds shall be entitled to enforce their rights against the Seller under this <u>Section 5.01(e)</u> solely through a cause of action brought for their benefit by the Indenture Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The Seller shall indemnify the Servicer (if the Servicer is not the Seller) for the costs of any action instituted by the Servicer pursuant to Section 5.02(d) of the Servicing Agreement that are not paid as Operating Expenses in accordance with the priorities set forth in Section 8.02(e) of the Indenture.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) The remedies provided in this Sale Agreement are the sole and exclusive remedies against the Seller for breach of its representations and warranties in this Sale Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) Notwithstanding (g) above, if the Seller remains an entity subject to the Commission's regulatory authority as a public utility (or otherwise for ratemaking purposes), the Seller acknowledges and agrees that the Commission may, subject to the outcome of an appropriate Commission proceeding, take such action as it deems necessary or appropriate under its regulatory authority to require the Seller to provide appropriate redress to Customers as a result of the Seller's material breach of the Seller's (i) representations or warranties set forth in this Agreement (other than the Seller's representations and warranties set forth <u>in Sections 3.08(d)</u>, <u>3.08(e)</u> and <u>3.08(i)</u> or (ii) covenants contained in this Agreement (other than the Seller's covenant set forth in the third sentence of <u>Section 4.08</u>).

The Seller acknowledges and agrees that such action by the Commission may include, but is not limited to, adjustments to the Seller's other regulated rates and charges or credits to Customers provided, however that such adjustments may not impact the Storm Recovery Charges or Storm Recovery Property.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) The Seller's obligations under this <u>Section 5.01</u> shall survive any repeal of, modification of, or supplement to, or judicial invalidation of, the Storm Recovery Law or the Financing Order and shall survive the resignation or removal of the Indenture Trustee or the termination of this Sale Agreement and will rank pari passu with other general, unsecured obligations of the Seller. The Seller shall not indemnify any party under this <u>Section 5.01</u> for any changes in law after the Closing Date, whether such changes in law are effected by means of any legislative enactment, any constitutional amendment or any final and non-appealable judicial decision.

SECTION 5.02. <u>Merger, Conversion or Consolidation of, or Assumption of the Obligations of, Seller</u>. Any Person (a) into which the Seller may be merged or consolidated and which succeeds to all or substantially all of the electric distribution business of the Seller, (b) which results from the division of the Seller into two or more Persons and which succeeds to all or substantially all of the electric distribution business of the Seller, (c) which may result from any merger or consolidation to which the Seller shall be a party and which succeeds to all or substantially all of the electric distribution business of the Seller, (d) which may succeed to the properties and assets of the Seller substantially as a whole and which succeeds to all or substantially all of the electric distribution business of the Seller, or (e) which may otherwise succeed to all or substantially all of the electric distribution business of the Seller, which Person in any of the foregoing cases executes an agreement of assumption to perform every obligation of the Seller under this Sale Agreement, shall be the successor to the Seller hereunder without the execution or filing of any document or any further act by any of the parties to this Sale Agreement; provided, however, that: (i) immediately after giving effect to such transaction, no representation or warranty made pursuant to <u>Article III</u> shall have been breached and no Servicer Default, and no event that, after notice or lapse of time, or both, would become a Servicer Default, shall have occurred and be continuing, (ii) the Seller shall have delivered to the Issuer and the Indenture Trustee an Officer's Certificate and an Opinion of Counsel each stating that such consolidation, reorganization, merger or succession and such agreement of assumption comply with this <u>Section 5.02</u> and that all conditions precedent, if any, provided for in this Sale Agreement relating to such transaction have been complied with, (iii) the Seller shall have delivered to the Issuer, the Indenture Trustee and the rating agencies an Opinion of Counsel stating that, in the opinion of such counsel, either (A) all filings to be made by the Seller or the Seller, in its capacity as Seller or as Servicer, including filings under the Storm Recovery Law with the Secretary of the State of the State of North Carolina and the UCC, that are necessary or advisable to fully preserve and protect the respective interests of the Issuer and the Indenture Trustee in the Storm Recovery Property have been executed and filed, and reciting the details of such filings, or (B) no such action is necessary to preserve and protect such interests, (iv) the Seller shall have given the Rating Agencies prior written notice of such transaction and (v) the Seller shall have delivered to the Issuer, the Indenture Trustee and the Rating Agencies an Opinion of Counsel from external tax counsel stating that, for U.S. federal income tax purposes, such consolidation, conversion, merger or succession and such agreement of assumption will not result in a material U.S. federal income tax consequence to the Issuer, the Seller, the Indenture Trustee or the Holders of Storm Recovery Bonds. When any Person (or more than one Person) acquires the properties and assets of the Seller substantially as a whole or otherwise becomes the successor, whether by merger, conversion, consolidation, sale, transfer, lease, management contract or otherwise, to all or substantially all of the assets of the Seller in accordance with the terms of this <u>Section 5.02</u>, then, upon satisfaction of all of the other conditions of this <u>Section 5.02</u>, the preceding Seller shall automatically and without further notice be released from all of its obligations hereunder.

SECTION 5.03. <u>Limitation on Liability of Seller and Others</u>. The Seller and any director, officer, employee or agent of the Seller may rely in good faith on the advice of counsel or on any document of any kind, prima facie properly executed and submitted by any Person, respecting any matters arising hereunder. Subject to <u>Section 4.08</u>, the Seller shall not be under any obligation to appear in, prosecute or defend any legal action that is not incidental to its obligations under this Sale Agreement and that in its opinion may involve it in any expense or liability.

ARTICLE VI**<br> MISCELLANEOUS PROVISIONS**

SECTION 6.01. <u>Amendment</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to <u>Section 6.01(b)</u>, this Sale Agreement may be amended in writing by the Seller and the Issuer with (a) the prior written consent of the Indenture Trustee (b) the satisfaction of the Rating Agency Condition and (c) if any amendment would adversely affect in any material respect the interest of any Holder of the Storm Recovery Bonds, the consent of a majority of the Holders of each affected tranche of Storm Recovery Bonds. In determining whether a majority of Holders of the Bonds have consented, Bonds owned by the Issuer or any Affiliate of the Issuer shall be disregarded, except that, in determining whether the Indenture Trustee shall be protected in relying upon any such consent, the Indenture Trustee shall only be required to disregard any Bonds it actually knows to be so owned. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

Prior to the execution of any amendment to this Sale Agreement, the Issuer and the Indenture Trustee shall be entitled to receive and rely upon (i) an Opinion of Counsel, which counsel may be an employee of or counsel to the Issuer or the Seller or external counsel of the Seller stating that the execution of such amendment is authorized and permitted by this Sale Agreement and that all conditions precedent provided for in this Sale Agreement relating to such amendment have been complied with and (ii) the Opinion of Counsel referred to in Section 3.01(c)(i) of the Servicing Agreement. The Issuer and the Indenture Trustee may, but shall not be obligated to, enter into any such amendment that affects the Indenture Trustee's own rights, duties or immunities under this Sale Agreement or otherwise.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Notwithstanding anything to the contrary in this <u>Section 6.01</u>, no amendment or modification of this Agreement shall be effective except upon satisfaction of the conditions precedent in this paragraph (b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) At least 15 days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in <u>Section 6.01(a)</u> (except that the consent of the Indenture Trustee may be subject to the consent of the Holders of the Storm Recovery Bonds if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification) the Seller shall have filed in Commission docket E-7, Sub 1325 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;A. a reference to Docket No. E-7, Sub 1325;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;B. an Officer's Certificate stating that the proposed amendment or modification has been approved by all parties to this Sale Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;C. a statement identifying the person to whom the Commission is to address any response to the proposed amendment or to request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Commission, within 15 days (subject to extension as provided in clause (iii)) of receiving a notification complying with subparagraph (i), shall have issued an order that the Commission might object to the proposed amendment or modification, then, except as provided in clause (iv) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in <u>Section 6.01(a)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Following the delivery of an order from the Commission to the Seller under subparagraph (ii), the Seller and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment. The fact that the Seller delivers notice to the Commission pursuant to this <u>Section 6.01(b)</u> does not obligate the Seller to amend this Sale Agreement as provided in the notice.

SECTION 6.02. <u>Notices</u>. Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) in the case of the Seller, to Duke Energy Carolinas, LLC at (i) 525 South Tryon Street Charlotte, North Carolina 28202, Attention: Director, Rates and Regulatory Strategy, Telephone: 800-488-3853 in care of (c/o): Director, Rates and Regulatory Planning and (ii) 525 South Tryon Street, Charlotte, North Carolina 28202, Attention: Treasurer, Telephone: 800-488-3853 c/o Assistant Treasurer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) in the case of the Issuer, to Duke Energy Carolinas NC Storm Funding II LLC, at 525 South Tryon Street Charlotte, North Carolina 28202, Attention: Manager, Telephone: 800-488-3853 in care of (c/o): Treasurer and at 525 South Tryon Street, Charlotte, North Carolina 28202, Attention: Structured Finance Director, Telephone: 800-488-2264;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) in the case of the Indenture Trustee, to the Corporate Trust Office;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) in the case of S&P, to Standard & Poor's Ratings Services, a Standard & Poor's Financial Services LLC business, Structured Credit Surveillance, 55 Water Street, New York, New York 10041, Telephone: (212) 438-8991, Email: servicer_reports@standardandpoors.com (all such notices to be delivered to S&P in writing by email);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) in the case of Moody's, to Moody's Investors Service, Inc., ABS/RMBS Monitoring Department, 24th Floor, 7 World Trade Center, 250 Greenwich Street, New York, New York 10007, Email: ServicerReports@moodys.com (all such notices to be delivered to Moody's in writing by email), and solely for purposes of Rating Agency Condition communications: abscormonitoring@moodys.com; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) in the case of the Commission and the Public Staff – North Carolina Utilities Commission, by filing a notice in docket E-7, Sub 1325, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff.

Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

SECTION 6.03. <u>Assignment</u>. Notwithstanding anything to the contrary contained herein, except as provided in <u>Section 5.02</u>, this Sale Agreement may not be assigned by the Seller.

SECTION 6.04. <u>Limitations on Rights of Third Parties</u>. The provisions of this Sale Agreement are solely for the benefit of the Seller, the Issuer, the Indenture Trustee (for the benefit of the Secured Parties) and the other Persons expressly referred to herein, and such Persons shall have the right to enforce the relevant provisions of this Sale Agreement. Nothing in this Sale Agreement, whether express or implied, shall be construed to give to any other Person any legal or equitable right, remedy or claim in the Storm Recovery Property or under or in respect of this Sale Agreement or any covenants, conditions or provisions contained herein. The Seller acknowledges under the authority granted to the Commission pursuant to Chapter 62 of the North Carolina General Statutes that the Commission has authority to enter an order enforcing the provisions of this Sale Agreement consistent with the Financing Order and Storm Recovery Law.

SECTION 6.05. <u>Severability</u>. Any provision of this Sale Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remainder of such provision (if any) or the remaining provisions hereof (unless such construction shall be unreasonable), and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 6.06. <u>Separate Counterparts</u>. This Sale Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. The parties hereto agree that this Sale Agreement may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by AdobeSign, DocuSign, Diligent Board or any other digital signature provider as specified and agreed upon in writing to the other parties) appearing on this Sale Agreement are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Sale Agreement may be made by facsimile, email or other electronic transmission.

SECTION 6.07. <u>Governing Law</u>. This Sale Agreement shall be construed in accordance with the laws of the State of North Carolina, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

SECTION 6.08. <u>Assignment to Indenture Trustee</u>. The Seller hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee pursuant to the Indenture for the benefit of the Secured Parties of all right, title and interest of the Issuer in, to and under this Sale Agreement, the Storm Recovery Property and the proceeds thereof and the assignment of any or all of the Issuer's rights hereunder to the Indenture Trustee for the benefit of the Secured Parties.

SECTION 6.09. <u>Limitation of Liability</u>. It is expressly understood and agreed by the parties hereto that this Sale Agreement is executed and delivered by the Indenture Trustee, not individually or personally but solely as Indenture Trustee on behalf of the Secured Parties, in the exercise of the powers and authority conferred and vested in it. The Indenture Trustee in acting hereunder is entitled to all rights, benefits, protections, immunities and indemnities accorded to it under the Indenture.

SECTION 6.10. <u>Waivers</u>. Any term or provision of this Sale Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof; <u>provided</u>, <u>however</u>, that no such waiver delivered by the Issuer shall be effective unless (i) the Indenture Trustee has given its prior written consent thereto and (ii) to extent such waiver would be to a material obligation of the Seller, as transferor of the Storm Recovery Property, the Commission shall have provided its consent in accordance with Section 6.01(b) of this Sale Agreement. Any such waiver shall be validly and sufficiently authorized for the purposes of this Sale Agreement if, as to any party, it is authorized in writing by an authorized representative of such party, with prompt written notice of any such waiver to be provided to the Rating Agencies and the Commission. The failure of any party hereto to enforce at any time any provision of this Sale Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Sale Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Sale Agreement shall be held to constitute a waiver of any other or subsequent breach.

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}

IN WITNESS WHEREOF, the parties hereto have caused this Sale Agreement to be duly executed by their respective officers as of the day and year first above written.

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| | |
|:---|:---|
| DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC<br> as Issuer | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC<br> as Issuer |
| By: |  |
|  | Name: |
|  | Title: |
| DUKE ENERGY CAROLINAS, LLC<br> as Seller | DUKE ENERGY CAROLINAS, LLC<br> as Seller |
| By: |  |
|  | Name: |
|  | Title: |

---

Acknowledged and Accepted:

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| | |
|:---|:---|
| U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br> as Indenture Trustee | U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION,<br> as Indenture Trustee |
| By: |  |
|  | Name: |
|  | Title: |

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*Signature Page to Storm Recovery Property Purchase and Sale Agreement*

EXHIBIT A

FORM OF BILL OF SALE

See attached

E-A-1

BILL OF SALE

This Bill of Sale is being delivered pursuant to the Storm Recovery Property Purchase and Sale Agreement, dated as of [Closing Date], 2025 (the "<u>Sale Agreement</u>"), by and between Duke Energy Carolinas, LLC (the "<u>Seller</u>") and Duke Energy Carolinas NC Storm Recovery Funding II LLC (the "<u>Issuer</u>"). All capitalized terms used but not otherwise defined herein shall have the respective meanings ascribed to such terms in the Sale Agreement.

In consideration of the Issuer's delivery to or upon the order of the Seller of $[ ], the Seller does hereby irrevocably sell, transfer, assign, set over and otherwise convey to the Issuer, without recourse or warranty, except as set forth in the Sale Agreement, all right, title and interest of the Seller in and to the Storm Recovery Property created or arising under the Financing Order dated June 18, 2025 issued by the North Carolina Utilities Commission under the Storm Recovery Law (such sale, transfer, assignment, setting over and conveyance of the Storm Recovery Property includes, to the fullest extent permitted by the Storm Recovery Law, the rights and interests of the Seller under the Financing Order, including the right of the Seller and any Successor or assignee of the Seller to impose, bill, charge, collect and receive Storm Recovery Charges, the right to obtain True-Up Adjustments and all revenue, collections, claims, rights to payments, payments, moneys and proceeds arising from the rights and interests specified in the Financing Order). Such sale, transfer, assignment, setting over and conveyance is hereby expressly stated to be a sale or other absolute transfer and, pursuant to N.C. Gen. Stat. § 62-172(e)(3)a., shall be treated as a true sale and not as a pledge of or secured transaction relating to the Seller's right, title, and interest in, to, and under the Storm Recovery Property. The Seller and the Issuer agree that after giving effect to the sale, transfer, assignment, setting over and conveyance contemplated hereby the Seller has no right, title or interest in, to, or under the Storm Recovery Property to which a security interest could attach because (i) it has sold, transferred, assigned, set over and conveyed all right, title and interest in and to the Storm Recovery Property to the Issuer, (ii) as provided in N.C. Gen. Stat. § 62-172(e)(3), all right, title and interest shall have passed to the Issuer and (iii) as provided in N.C. Gen. Stat. § 62-172(e)(3)d., appropriate financing statements have been filed and such transfer is perfected against all third parties, including subsequent judicial or other lien creditors. If such sale, transfer, assignment, setting over and conveyance is held by any court of competent jurisdiction not to be a true sale as provided in N.C. Gen. Stat. § 62-172(e)(3), then such sale, transfer, assignment, setting over and conveyance shall be treated as a pledge of the Storm Recovery Property and as the creation of a security interest (within the meaning of the Storm Recovery Law and the UCC) in the Storm Recovery Property and, without prejudice to its position that it has absolutely transferred all of its rights in the Storm Recovery Property to the Issuer, the Seller hereby grants a security interest in the Storm Recovery Property to the Issuer (and to the Indenture Trustee for the benefit of the Secured Parties) to secure their respective rights under the Basic Documents to receive the Storm Recovery Charges and all other Storm Recovery Property.

The Issuer does hereby purchase the Storm Recovery Property from the Seller for the consideration set forth in the preceding paragraph.

Each of the Seller and the Issuer acknowledges and agrees that the purchase price for the Storm Recovery Property sold pursuant to this Bill of Sale and the Sale Agreement is equal to its fair market value at the time of sale.

The Seller confirms that (i) each of the representations and warranties on the part of the Seller contained in the Sale Agreement are true and correct in all respects on the date hereof as if made on the date hereof and (ii) each condition precedent that must be satisfied under Section 2.02 of the Sale Agreement has been satisfied upon or prior to the execution and delivery of this Bill of Sale by the Seller.

This Bill of Sale may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument.

**This Bill of Sale shall be construed in accordance with the laws of the State of North Carolina, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such law.**

IN WITNESS WHEREOF, the Seller and the Issuer have duly executed this Bill of Sale as of this [ ] day of [ ], 2025.

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| | |
|:---|:---|
| DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br> as Issuer | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br> as Issuer |
| By: |  |
|  | Name: |
|  | Title: |
| DUKE ENERGY CAROLINAS, LLC,<br> as Seller | DUKE ENERGY CAROLINAS, LLC,<br> as Seller |
| By: |  |
|  | Name: |
|  | Title: |

---

E-A-4

## Exhibit 10.3

**Exhibit 10.3**

ADMINISTRATION AGREEMENT

This ADMINISTRATION AGREEMENT, dated as of [Closing Date], 2025, is entered into by and between Duke Energy Carolinas, LLC, a North Carolina limited liability company ("DEC"), as administrator (the "Administrator"), and Duke Energy Carolinas NC Storm Funding II LLC, a Delaware limited liability company (the "Issuer").

Capitalized terms used but not otherwise defined in this Administration Agreement shall have the respective meanings given to such terms in <u>Appendix A</u> of the Indenture, which is hereby incorporated by reference into this Administration Agreement as if set forth fully in this Administration Agreement. Not all terms defined in <u>Appendix A</u> are used in this Administration Agreement. The rules of construction set forth in <u>Appendix A</u> shall apply to this Administration Agreement and are hereby incorporated by reference into this Administration Agreement as if set forth fully in this Administration Agreement.

W I T N E S S E T H:

WHEREAS, the Issuer is issuing Storm Recovery Bonds pursuant to the Indenture and the Series Supplement dated the date hereof;

WHEREAS, the Issuer has entered into certain agreements in connection with the issuance of Storm Recovery Bonds, including (a) the Indenture, (b) the Servicing Agreement, (c) the Sale Agreement and (d) the other Basic Documents to which the Issuer is a party;

WHEREAS, pursuant to the Basic Documents, the Issuer is required to perform certain duties in connection with the Basic Documents, the Storm Recovery Bonds and the Storm Recovery Collateral pledged to the Indenture Trustee pursuant to the Indenture and Series Supplement dated the date hereof;

WHEREAS, the Issuer has no employees, other than its officers and managers, and does not intend to hire any employees, and consequently desires to have the Administrator perform certain of the duties of the Issuer referred to above and to provide such additional services consistent with the terms of this Administration Agreement and the other Basic Documents as the Issuer may from time to time request; and

WHEREAS, the Administrator has the capacity to provide the services and the facilities required thereby and is willing to perform such services and provide such facilities for the Issuer on the terms set forth herein;

NOW, THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1 <u>Duties of the Administrator; Management Services</u>. The Administrator hereby agrees to provide the following corporate management services to the Issuer and to cause third parties to provide professional services required for or contemplated by such services in accordance with the provisions of this Administration Agreement:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) furnish the Issuer with ordinary clerical, bookkeeping and other corporate administrative services necessary and appropriate for the Issuer, including the following services:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) maintain at the Premises general accounting records of the Issuer (the "<u>Account Records</u>"), subject to year-end audit, in accordance with generally accepted accounting principles, separate and apart from its own accounting records, prepare or cause to be prepared such quarterly and annual financial statements as may be necessary or appropriate and arrange for year-end audits of the Issuer's financial statements by the Issuer's independent accountants;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) prepare and, after execution by the Issuer, file with the SEC and any applicable state agencies documents required to be filed by the Issuer with the SEC and any applicable state agencies, including periodic reports required to be filed under the Exchange Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) prepare for execution by the Issuer and cause to be filed such income, franchise or other tax returns of the Issuer as shall be required to be filed by applicable law (the "<u>Tax Returns</u>") and cause to be paid on behalf of the Issuer from the Issuer's funds any taxes required to be paid by the Issuer under applicable law;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) prepare or cause to be prepared for execution by the Issuer's Managers minutes of the meetings of the Issuer's Managers and such other documents deemed appropriate by the Issuer to maintain the separate limited liability company existence and good standing of the Issuer (the "<u>Company Minutes</u>") or otherwise required under the Basic Documents (together with the Account Records, the Tax Returns, the Company Minutes, the LLC Agreement and the Certificate of Formation, the "<u>Issuer Documents</u>") and any other documents deliverable by the Issuer thereunder or in connection therewith; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(v) hold, maintain and preserve at the Premises (or such other place as shall be required by any of the Basic Documents) executed copies (to the extent applicable) of the Issuer Documents and other documents executed by the Issuer thereunder or in connection therewith;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) take such actions on behalf of the Issuer as are necessary or desirable for the Issuer to keep in full effect its existence, rights and franchises as a limited liability company under the laws of the State of Delaware and obtain and preserve its qualification to do business in each jurisdiction in which it becomes necessary to be so qualified;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) take such actions on the behalf of the Issuer as are necessary for the issuance and delivery of Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) provide for the performance by the Issuer of its obligations under each of the Basic Documents, and prepare, or cause to be prepared, all documents, reports, filings, instruments, notices, certificates and opinions that it shall be the duty of the Issuer to prepare, file or deliver pursuant to the Basic Documents;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) to the full extent allowable under applicable law, enforce each of the rights of the Issuer under the Basic Documents, at the direction of the Indenture Trustee;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) provide for the defense, at the direction of the Issuer's Managers, of any action, suit or proceeding brought against the Issuer or affecting the Issuer or any of its assets;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) provide office space (the "<u>Premises</u>") for the Issuer and such reasonable ancillary services as are necessary to carry out the obligations of the Administrator hereunder, including telecopying, duplicating and word processing services;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(h) provide the Indenture Trustee with copies of the filing by the Issuer under the Exchange Act;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) undertake such other administrative services as may be appropriate, necessary or requested by the Issuer; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(j) provide such other services as are incidental to the foregoing or as the Issuer and the Administrator may agree.

In providing the services under this <u>Section 1</u> and as otherwise provided under this Administration Agreement, the Administrator will not knowingly take any actions on behalf of the Issuer that (i) the Issuer is prohibited from taking under the Basic Documents, or (ii) would cause the Issuer to be in violation of any U.S. federal, state or local law or the LLC Agreement.

In performing its duties hereunder, the Administrator shall use the same degree of care and diligence that the Administrator exercises with respect to performing such duties for its own account and, if applicable, for others.

Section 2 <u>Compensation</u>. As compensation for the performance of the Administrator's obligations under this Administration Agreement (including the compensation of Persons serving as Manager(s), other than the Independent Manager(s), and officers of the Issuer, but, for the avoidance of doubt, excluding the performance by Duke Energy Carolinas of its obligations in its capacity as Servicer), the Administrator shall be entitled to $50,000 annually (the "<u>Administration Fee</u>"), payable by the Issuer in full on the first Payment Date following the issuance of the Storm Recovery Bonds and every second Payment Date thereafter. In addition, the Administrator shall be entitled to be reimbursed by the Issuer for all costs and expenses of services performed by unaffiliated third parties and actually incurred by the Administrator in connection with the performance of its obligations under this Administration Agreement in accordance with <u>Section 3</u> (but, for the avoidance of doubt, excluding any such costs and expenses incurred by Duke Energy Carolinas in its capacity as Servicer), to the extent that such costs and expenses are supported by invoices or other customary documentation and are reasonably allocated to the Issuer ("<u>Reimbursable Expenses</u>").

Section 3 <u>Third Party Services</u>. Any services required for or contemplated by the performance of the above-referenced services by the Administrator to be provided by unaffiliated third parties (including independent accountants' fees and counsel fees) may, if provided for or otherwise contemplated by the Financing Order and if the Issuer deems it necessary or desirable, be arranged by the Issuer or by the Administrator at the direction (which may be general or specific) of the Issuer. Costs and expenses associated with the contracting for such third-party professional services may be paid directly by the Issuer or paid by the Administrator and reimbursed by the Issuer in accordance with <u>Section 2</u>, or otherwise as the Administrator and the Issuer may mutually arrange.

Section 4 <u>Additional Information to be Furnished to the Issuer</u>. The Administrator shall furnish to the Issuer from time to time such additional information regarding the Storm Recovery Collateral or the Collateral, as applicable, as the Issuer shall reasonably request.

Section 5 <u>Independence of the Administrator</u>. For all purposes of this Administration Agreement, the Administrator shall be an independent contractor and shall not be subject to the supervision of the Issuer with respect to the manner in which it accomplishes the performance of its obligations hereunder. Unless expressly authorized by the Issuer, the Administrator shall have no authority, and shall not hold itself out as having the authority, to act for or represent the Issuer in any way and shall not otherwise be deemed an agent of the Issuer.

Section 6 <u>No Joint Venture</u>. Nothing contained in this Administration Agreement (a) shall constitute the Administrator and the Issuer as partners or co-members of any partnership, joint venture, association, syndicate, unincorporated business or other separate entity, (b) shall be construed to impose any liability as such on either of them or (c) shall be deemed to confer on either of them any express, implied or apparent authority to incur any obligation or liability on behalf of the other.

Section 7 <u>Other Activities of Administrator</u>. Nothing herein shall prevent the Administrator or any of its members, managers, officers, employees or affiliates from engaging in other businesses or, in its sole discretion, from acting in a similar capacity as an administrator for any other Person even though such Person may engage in business activities similar to those of the Issuer.

Section 8 <u>Term of Agreement; Resignation and Removal of Administrator</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) This Administration Agreement shall continue in force until the payment in full of the Storm Recovery Bonds and any other amount that may become due and payable under the Indenture, upon which event this Administration Agreement shall automatically terminate. Notwithstanding the foregoing, the Administrator's obligation under <u>Section 11(c)</u> to indemnify DEC Customers shall survive termination of this Administration Agreement.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) Subject to <u>Section 8(e)</u> and <u>Section 8(f)</u>, the Administrator may resign its duties hereunder by providing the Issuer, the Commission and the Rating Agencies with at least 60 days' prior written notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) Subject to <u>Section 8(e)</u> and <u>Section 8(f)</u>, the Issuer may remove the Administrator without cause by providing the Administrator, the Commission and the Rating Agencies with at least 60 days' prior written notice.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) Subject to <u>Section 8(e)</u> and <u>Section 8(f)</u>, at the sole option of the Issuer, the Administrator may be removed immediately upon written notice of termination from the Issuer to the Administrator and the Rating Agencies if any of the following events shall occur:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) the Administrator shall default in the performance of any of its duties under this Administration Agreement and, after notice of such default, shall fail to cure such default within ten days (or, if such default cannot be cured in such time, shall (A) fail to give within ten days such assurance of cure as shall be reasonably satisfactory to the Issuer and (B) fail to cure such default within 30 days thereafter);

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) a court of competent jurisdiction shall enter a decree or order for relief, and such decree or order shall not have been vacated within 60 days, in respect of the Administrator in any involuntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, or such court shall appoint a receiver, liquidator, assignee, custodian, trustee, sequestrator or similar official for the Administrator or any substantial part of its property or order the winding-up or liquidation of its affairs; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) the Administrator shall commence a voluntary case under any applicable bankruptcy, insolvency or other similar law now or hereafter in effect, shall consent to the entry of an order for relief in an involuntary case under any such law, shall consent to the appointment of a receiver, liquidator, assignee, trustee, custodian, sequestrator or similar official for the Administrator or any substantial part of its property, shall consent to the taking of possession by any such official of any substantial part of its property, shall make any general assignment for the benefit of creditors or shall fail generally to pay its debts as they become due.

The Administrator agrees that if any of the events specified in <u>Section 8(d)(ii)</u> or <u>Section 8(d)(iii)</u> shall occur, it shall give written notice thereof to the Issuer, the Commission and the Indenture Trustee as soon as practicable but in any event within seven days after the happening of such event.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) No resignation or removal of the Administrator pursuant to this <u>Section 8</u> shall be effective until a successor Administrator has been appointed by the Issuer, the Rating Agency Condition shall have been satisfied with respect to the proposed appointment, the Commission Condition set forth in <u>Section 13(b)</u> of this Administration Agreement has been satisfied, and such successor Administrator has agreed in writing to be bound by the terms of this Administration Agreement in the same manner as the Administrator is bound hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) The appointment of any successor Administrator shall be effective only after satisfaction of the Rating Agency Condition and the Commission Condition with respect to the proposed appointment.

Section 9 <u>Action upon Termination, Resignation or Removal</u>. Promptly upon the effective date of termination of this Administration Agreement pursuant to <u>Section 8(a)</u>, the resignation of the Administrator pursuant to <u>Section 8(b)</u> or the removal of the Administrator pursuant to <u>Section 8(c)</u> or <u>Section 8(d)</u>, the Administrator shall be entitled to be paid a pro-rated portion of the annual fee described in <u>Section 2</u> through the date of termination and all Reimbursable Expenses incurred by it through the date of such termination, resignation or removal. The Administrator shall forthwith upon such termination pursuant to <u>Section 8(a)</u> deliver to the Issuer all property and documents of or relating to the Collateral then in the custody of the Administrator. In the event of the resignation of the Administrator pursuant to <u>Section 8(b)</u> or the removal of the Administrator pursuant to <u>Section 8(c)</u> or <u>Section 8(d)</u>, the Administrator shall cooperate with the Issuer and take all reasonable steps requested to assist the Issuer in making an orderly transfer of the duties of the Administrator.

Section 10 <u>Administrator's Liability</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Except as otherwise provided herein, the Administrator assumes no liability other than to render or stand ready to render the services called for herein, and neither the Administrator nor any of its members, managers, officers, employees or affiliates shall be responsible for any action of the Issuer or any of the members, managers, officers, employees or affiliates of the Issuer (other than the Administrator itself). The Administrator shall not be liable for nor shall it have any obligation with regard to any of the liabilities, whether direct or indirect, absolute or contingent, of the Issuer or any of the members, managers, officers, employees or affiliates of the Issuer (other than the Administrator itself).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Administrator acknowledges under the authority granted to the Commission pursuant to Chapter 62 of the North Carolina General Statutes that the Commission has authority to enter an order enforcing the provisions of this Administration Agreement consistent with the Financing Order and Storm Recovery Law.

Section 11 <u>Indemnity</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to the priority of payments set forth in the Indenture, the Issuer shall indemnify the Administrator and its shareholders, directors, officers, employees and affiliates against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all expenses of litigation or preparation therefor whether or not the Administrator is a party thereto) that any of them may pay or incur arising out of or relating to this Administration Agreement and the services called for herein; <u>provided</u>, <u>however</u>, that such indemnity shall not apply to any such loss, claim, damage, penalty, judgment, liability or expense resulting from the Administrator's negligence or willful misconduct in the performance of its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) The Administrator shall indemnify the Issuer and its members, managers, officers and employees against all losses, claims, damages, penalties, judgments, liabilities and expenses (including all expenses of litigation or preparation therefor whether or not the Issuer is a party thereto) that any of them may incur as a result of the Administrator's negligence or willful misconduct in the performance of its obligations hereunder.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) The Administrator will credit Customers to the extent there are higher Storm Recovery Charges resulting from the Administrator's negligence, recklessness or willful misconduct, provided, however, that any credit to Customers shall not impact the Storm Recovery Charges or the Storm Recovery Property. This <u>Section 11(c)</u> shall survive the termination of this Administration Agreement, and any amounts paid with respect thereto shall be remitted and deposited with the Indenture Trustee for deposit into the Collection Account, unless otherwise directed by the Commission.

Section 12 <u>Notices</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Any notice, report or other communication given hereunder shall be in writing and shall be effective (i) upon receipt when sent through the mails, registered or certified mail, return receipt requested, postage prepaid, with such receipt to be effective the date of delivery indicated on the return receipt, (ii) upon receipt when sent by an overnight courier, (iii) on the date personally delivered to an authorized officer of the party to which sent or (iv) on the date transmitted by facsimile or other electronic transmission with a confirmation of receipt in all cases, addressed as follows:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) if to the Issuer, to Duke Energy Carolinas NC Storm Funding II LLC, at 525 South Tryon Street Charlotte, North Carolina 28202, Attention: Manager, Telephone: 800-488-3853;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) if to the Administrator, to Duke Energy Carolinas, LLC, at 525 South Tryon Street Charlotte, North Carolina 28202, Attention: Director, Rates and Regulatory Strategy, Telephone: 800-488-3853 in care of (c/o): Director, Rates and Regulatory Planning and at 525 South Tryon Street, Charlotte, North Carolina 28202, Attention: Treasurer, Telephone: 800-488-3853 c/o Assistant Treasurer;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) if to the Commission and the Public Staff – North Carolina Commission, by filing a notice in docket E-7, Sub 1325 with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) if to the Indenture Trustee, to the Corporate Trust Office.

Each party hereto may, by notice given in accordance herewith to the other party or parties hereto, designate any further or different address to which subsequent notices, reports and other communications shall be sent.

Section 13 <u>Amendments</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) Subject to <u>Section 13(b)</u>, this Administration Agreement may be amended from time to time by a written amendment duly executed and delivered by each of the Issuer and the Administrator, with the prior written consent of the Indenture Trustee, the satisfaction of the Rating Agency Condition; <u>provided</u>, that any such amendment may not adversely affect the interest of any Holder in any material respect without the consent of the Holders of a majority of the outstanding principal amount of all Storm Recovery Bonds. Promptly after the execution of any such amendment or consent, the Issuer shall furnish copies of such amendment or consent to each of the Rating Agencies.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) <u>Commission Condition</u>. Notwithstanding anything to the contrary in this <u>Section 13</u>, no amendment or modification of this Administration Agreement shall be effective, nor shall any action requiring satisfaction of this condition pursuant to <u>Section 8(e)</u>, <u>Section 8(f)</u>, or <u>Section 14</u> of this Administration Agreement be taken or be effective except upon satisfaction of the conditions precedent in this paragraph (b).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(i) At least 15 days prior to the effectiveness of any such amendment or modification and after obtaining the other necessary approvals set forth in <u>Section 13(a)</u> (except that the consent of the Indenture Trustee may be subject to the consent of the Holders of the Storm Recovery Bonds if such consent is required or sought by the Indenture Trustee in connection with such amendment or modification) the Administrator shall have filed in Commission docket E-7 Sub 1325 written notification of any proposed amendment, with a copy delivered to the Director of the Commission and the Executive Director of the Public Staff – North Carolina Utilities Commission, which notification shall contain:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(A) a reference to Docket No. E-7 Sub 1325;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(B) an Officer's Certificate stating that the proposed amendment or modification has been approved by all parties to this Administration Agreement; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(C) a statement identifying the person to whom the Commission is to address any response to the proposed amendment or to request additional time.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(ii) If the Commission, within 15 days of receiving a notification complying with subparagraph (i), shall have an order that the Commission might object to the proposed amendment or modification, then, subject to clause (iii) below, such proposed amendment or modification shall not be effective unless and until the Commission subsequently issues an order that it does not object to such proposed amendment or modification; or

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iii) If the Commission takes no action within 60 days of the filing of the notice, then such amendment or modification may subsequently become effective upon satisfaction of the other conditions specified in <u>Section 13(a)</u>.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(iv) Following the delivery of an order from the Commission to the Administrator under subparagraph (ii), the Administrator and the Issuer shall have the right at any time to withdraw from the Commission further consideration of any proposed amendment. The fact that the Administrator delivers notice to the Commission pursuant to this <u>Section 13(b)</u> does not obligate the Administrator to amend this Administration Agreement as provided in the notice.

Section 14 <u>Successors and Assigns</u>. This Administration Agreement may not be assigned by the Administrator unless such assignment is previously consented to in writing by the Issuer and the Indenture Trustee and by order of the Commission and subject to the satisfaction of the Rating Agency Condition in connection therewith. Any assignment with such consent and satisfaction, if accepted by the assignee, shall bind the assignee hereunder in the same manner as the Administrator is bound hereunder. Notwithstanding the foregoing, this Administration Agreement may be assigned by the Administrator without the consent of the Issuer, the Commission or the Indenture Trustee and without satisfaction of the Rating Agency Condition and the Commission Condition to a corporation or other organization that is a successor (by merger, reorganization, consolidation or purchase of assets) to the Administrator, including any Permitted Successor; <u>provided</u>, that such successor or organization executes and delivers to the Issuer and the Commission an agreement in which such corporation or other organization agrees to be bound hereunder by the terms of said assignment in the same manner as the Administrator is bound hereunder. Subject to the foregoing, this Administration Agreement shall bind any successors or assigns of the parties hereto. Upon satisfaction of all of the conditions of this <u>Section 14</u>, the preceding Administrator shall automatically and without further notice be released from all of its obligations hereunder.

Section 15 <u>Governing Law</u>. This Administration Agreement shall be construed in accordance with the laws of the State of North Carolina, without reference to its conflict of law provisions, and the obligations, rights and remedies of the parties hereunder shall be determined in accordance with such laws.

Section 16 <u>Counterparts</u>. This Administration Agreement may be executed in counterparts, each of which when so executed shall be an original, but all of which together shall constitute but one and the same Administration Agreement. The parties hereto agree that this Administration Agreement may be electronically signed, that any digital or electronic signatures (including pdf, facsimile or electronically imaged signatures provided by AdobeSign, DocuSign, Diligent Board or any other digital signature provider as specified and agreed upon in writing to the other parties) appearing on this Administration Agreement are the same as handwritten signatures for the purposes of validity, enforceability and admissibility, and that delivery of any such electronic signature to, or a signed copy of, this Administration Agreement may be made by facsimile, email or other electronic transmission.

Section 17 <u>Severability</u>. Any provision of this Administration Agreement that is prohibited or unenforceable in any jurisdiction shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

Section 18 <u>Nonpetition Covenant</u>. Notwithstanding any prior termination of this Administration Agreement, the Administrator covenants that it shall not, prior to the date that is one year and one day after payment in full of all Storm Recovery Bonds, acquiesce, petition or otherwise invoke or cause the Issuer to invoke the process of any court or government authority for the purpose of commencing or sustaining an involuntary case against the Issuer under any U.S. federal or state bankruptcy, insolvency or similar law or appointing a receiver, liquidator, assignee, trustee, custodian, sequestrator or other similar official of the Issuer or any substantial part of its property or ordering the winding up or liquidation of the affairs of the Issuer.

Section 19 <u>Assignment to Indenture Trustee</u>. The Administrator hereby acknowledges and consents to any mortgage, pledge, assignment and grant of a security interest by the Issuer to the Indenture Trustee for the benefit of the Holders pursuant to the Indenture of any or all of the Issuer's rights hereunder and the assignment of any or all of the Issuer's rights hereunder to the Indenture Trustee for the benefit of the Holders.

{REMAINDER OF PAGE INTENTIONALLY LEFT BLANK}

IN WITNESS WHEREOF, the parties have caused this Administration Agreement to be duly executed and delivered as of the day and year first above written.

---

| | |
|:---|:---|
| DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br> as Issuer | DUKE ENERGY CAROLINAS NC STORM FUNDING II LLC,<br> as Issuer |
| By: |  |
|  | Name: |
|  | Title: |
| DUKE ENERGY CAROLINAS, LLC,<br> as Administrator | DUKE ENERGY CAROLINAS, LLC,<br> as Administrator |
| By: |  |
|  | Name: |
|  | Title: |

---

*Signature Page to Administration Agreement*

## Exhibit 21.1

**Exhibit 21.1**

**Subsidiaries of**

**Duke Energy Carolinas, LLC**

---

| | |
|:---|:---|
| Name of Subsidiary | Jurisdiction of Formation |
| Advanced SC LLC | South Carolina |
| Caldwell Power Company | North Carolina |
| Catawba Mfg. & Electric Power Co. | North Carolina |
| Claiborne Energy Services, Inc. | Louisiana |
| DEC Purchasing Company, LLC | Delaware |
| Duke Energy Carolinas NC Storm Funding II LLC | Delaware |
| Duke Energy Carolinas NC Storm Funding LLC | Delaware |
| Duke Energy Receivables Finance Company, LLC | Delaware |
| Eastover Land Company | Kentucky |
| Eastover Mining Company | Kentucky |
| Greenville Gas and Electric Light and Power Company | South Carolina |
| MPC, LLC | South Carolina |
| Sandy River Timber, LLC | South Carolina |
| Southern Power Company | North Carolina |
| TBP Properties, LLC | South Carolina |
| TRES Timber, LLC | South Carolina |
| Wateree Power Company | South Carolina |
| Western Carolina Power Company | North Carolina |

---

## Exhibit 25.1

**Exhibit 25.1**

**securities and exchange commission**

**Washington, D.C. 20549**

**FORM T-1**

**Statement of Eligibility Under**

**The Trust Indenture Act of 1939 of a**

**Corporation Designated to Act as Trustee**

Check if an Application to Determine Eligibility of

a Trustee Pursuant to Section 305(b)(2) ◻

**U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**

(Exact name of Trustee as specified in its charter)

**91-1821036**

I.R.S. Employer Identification No.

800 Nicollet Mall Minneapolis, Minnesota <u> 55402</u> <br> <u>(Address of principal executive offices)</u> <u>(Zip Code)</u>

Jose A. Galarza

U.S. Bank Trust Company, National Association

190 S. LaSalle Street

Chicago, IL 60603

(312) 332-7453

(Name, address and telephone number of agent for service)

**Duke Energy Carolinas NC Storm Funding II LLC**

(Issuer with respect to the Securities)

Delaware <u>39-3183527</u> <br> <u>(State or other jurisdiction of incorporation or organization)</u> <u>(I.R.S. Employer Identification No.)</u> <br>    

525 South Tryon Street Charlotte, North Carolina <u> 28202</u> <br> <u>(Address of Principal Executive Offices)</u> <u>(Zip Code)</u>

**SERIES A SENIOR SECURED STORM RECOVERY BONDS**

**(Title of the Indenture Securities)**

**<u>FORM T-1</u>**

**Item 1.** **GENERAL INFORMATION*.*** Furnish the following information as to the Trustee.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;a) *Name and address of each examining or supervising authority to which it is subject.* 

Comptroller of the Currency

Washington, D.C.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;b) *Whether it is authorized to exercise corporate trust powers.* 

Yes

**Item 2.** **AFFILIATIONS WITH THE OBLIGOR.** *If the obligor is an affiliate of the Trustee, describe each such affiliation.*

None

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| | |
|:---|:---|
| **Items 3-15** | *Items 3-15 are not applicable because to the best of the Trustee's knowledge, the obligor is not in default under any Indenture for which the Trustee acts as Trustee.* |

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**Item 16.** **LIST OF EXHIBITS:** *List below all exhibits filed as a part of this statement of eligibility and qualification.*

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. A copy of the Articles of Association
of the Trustee, attached as Exhibit 1.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. A copy of the certificate of
authority of the Trustee to commence business, attached as Exhibit 2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. A copy of the authorization
of the Trustee to exercise corporate trust powers, included as Exhibit 2.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. A copy of the existing bylaws of the Trustee,
 attached as Exhibit 4.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. A copy of each Indenture referred to in
 Item 4. Not applicable.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The consent of the Trustee required by Section 321(b) of
 the Trust Indenture Act of 1939, attached as Exhibit 6.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. Report of Condition of the Trustee as of
 March 31, 2025, published pursuant to law or the requirements of its supervising or
 examining authority, attached as Exhibit 7.

**SIGNATURE**

Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the Trustee, U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility and qualification to be signed on its behalf by the undersigned, thereunto duly authorized, all in the City of Chicago, State of Illinois on the 18<sup>th</sup> of July, 2025.

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| | |
|:---|:---|
| By: | /s/ Jose A. Galarza |
|  | Jose A. Galarza |
|  | Vice President |

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**<u>Exhibit 1</u>**

**ARTICLES OF ASSOCIATION**

**OF**

**U. S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**

For the purpose of organizing an association (the "Association") to perform any lawful activities of national banks, the undersigned enter into the following Articles of Association:

**FIRST.** The title of this Association shall be U. S. Bank Trust Company, National Association.

**SECOND.** The main office of the Association shall be in the city of Portland, county of Multnomah, state of Oregon. The business of the Association will be limited to fiduciary powers and the support of activities incidental to the exercise of those powers. The Association may not expand or alter its business beyond that stated in this article without the prior approval of the Comptroller of the Currency.

**THIRD.** The board of directors of the Association shall consist of not less than five nor more than twenty-five persons, the exact number to be fixed and determined from time to time by resolution of a majority of the full board of directors or by resolution of a majority of the shareholders at any annual or special meeting thereof. Each director shall own common or preferred stock of the Association or of a holding company owning the Association, with an aggregate par, fair market, or equity value of not less than $1,000, as of either (i) the date of purchase, (ii) the date the person became a director, or (iii) the date of that person's most recent election to the board of directors, whichever is more recent. Any combination of common or preferred stock of the Association or holding company may be used.

Any vacancy in the board of directors may be filled by action of a majority of the remaining directors between meetings of shareholders. The board of directors may increase the number of directors up to the maximum permitted by law. Terms of directors, including directors selected to fill vacancies, shall expire at the next regular meeting of shareholders at which directors are elected, unless the directors resign or are removed from office. Despite the expiration of a director's term, the director shall continue to serve until his or her successor is elected and qualified or until there is a decrease in the number of directors and his or her position is eliminated.

Honorary or advisory members of the board of directors, without voting power or power of final decision in matters concerning the business of the Association, may be appointed by resolution of a majority of the full board of directors, or by resolution of shareholders at any annual or special meeting. Honorary or advisory directors shall not be counted to determined the number of directors of the Association or the presence of a quorum in connection with any board action, and shall not be required to own qualifying shares.

**FOURTH.** There shall be an annual meeting of the shareholders to elect directors and transact whatever other business may be brought before the meeting. It shall be held at the main office or any other convenient place the board of directors may designate, on the day of each year specified therefor in the Bylaws, or if that day falls on a legal holiday in the state in which the Association is located, on the next following banking day. If no election is held on the day fixed or in the event of a legal holiday on the following banking day, an election may be held on any subsequent day within 60 days of the day fixed, to be designated by the board of directors, or, if the directors fail to fix the day, by shareholders representing two-thirds of the shares issued and outstanding. In all cases, at least 10 days' advance notice of the meeting shall be given to the shareholders by first-class mail.

In all elections of directors, the number of votes each common shareholder may cast will be determined by multiplying the number of shares he or she owns by the number of directors to be elected. Those votes may be cumulated and cast for a single candidate or may be distributed among two or more candidates in the manner selected by the shareholder. On all other questions, each common shareholder shall be entitled to one vote for each share of stock held by him or her.

A director may resign at any time by delivering written notice to the board of directors, its chairperson, or to the Association, which resignation shall be effective when the notice is delivered unless the notice specifies a later effective date.

A director may be removed by the shareholders at a meeting called to remove him or her, when notice of the meeting stating that the purpose or one of the purposes is to remove him or her is provided, if there is a failure to fulfill one of the affirmative requirements for qualification, or for cause; provided, however, that a director may not be removed if the number of votes sufficient to elect him or her under cumulative voting is voted against his or her removal.

**FIFTH.** The authorized amount of capital stock of the Association shall be 1,000,000 shares of common stock of the par value of ten dollars ($10) each; but said capital stock may be increased or decreased from time to time, according to the provisions of the laws of the United States. The Association shall have only one class of capital stock.

No holder of shares of the capital stock of any class of the Association shall have any preemptive or preferential right of subscription to any shares of any class of stock of the Association, whether now or hereafter authorized, or to any obligations convertible into stock of the Association, issued, or sold, nor any right of subscription to any thereof other than such, if any, as the board of directors, in its discretion, may from time to time determine and at such price as the board of directors may from time to time fix.

Transfers of the Association's stock are subject to the prior written approval of a federal depository institution regulatory agency. If no other agency approval is required, the approval of the Comptroller of the Currency must be obtained prior to any such transfers.

Unless otherwise specified in the Articles of Association or required by law, (1) all matters requiring shareholder action, including amendments to the Articles of Association must be approved by shareholders owning a majority voting interest in the outstanding voting stock, and (2) each shareholder shall be entitled to one vote per share.

Unless otherwise specified in the Articles of Association or required by law, all shares of voting stock shall be voted together as a class, on any matters requiring shareholder approval.

Unless otherwise provided in the Bylaws, the record date for determining shareholders entitled to notice of and to vote at any meeting is the close of business on the day before the first notice is mailed or otherwise sent to the shareholders, provided that in no event may a record date be more than 70 days before the meeting.

The Association, at any time and from time to time, may authorize and issue debt obligations, whether subordinated, without the approval of the shareholders. Obligations classified as debt, whether subordinated, which may be issued by the Association without the approval of shareholders, do not carry voting rights on any issue, including an increase or decrease in the aggregate number of the securities, or the exchange or reclassification of all or part of securities into securities of another class or series.

**SIXTH.** The board of directors shall appoint one of its members president of this Association and one of its members chairperson of the board and shall have the power to appoint one or more vice presidents, a secretary who shall keep minutes of the directors' and shareholders' meetings and be responsible for authenticating the records of the Association, and such other officers and employees as may be required to transact the business of this Association. A duly appointed officer may appoint one or more officers or assistant officers if authorized by the board of directors in accordance with the Bylaws.

The board of directors shall have the power to:

(1) Define
 the duties of the officers, employees, and agents of the Association.

(2) Delegate
 the performance of its duties, but not the responsibility for its duties, to the officers,
 employees, and agents of the Association.

(3) Fix
 the compensation and enter employment contracts with its officers and employees upon reasonable
 terms and conditions consistent with applicable law.

(4) Dismiss
 officers and employees.

(5) Require
 bonds from officers and employees and to fix the penalty thereof.

(6) Ratify
 written policies authorized by the Association's management or committees of the board.

(7) Regulate
 the manner any increase or decrease of the capital of the Association shall be made; provided
 that nothing herein shall restrict the power of shareholders to increase or decrease the
 capital of the Association in accordance with law, and nothing shall raise or lower from
 two-thirds the percentage required for shareholder approval to increase or reduce the capital.

(8) Manage
 and administer the business and affairs of the Association.

(9) Adopt
 initial Bylaws, not inconsistent with law or the Articles of Association, for managing the
 business and regulating the affairs of the Association.

(10) Amend
 or repeal Bylaws, except to the extent that the Articles of Association reserve this power
 in whole or in part to the shareholders.

(11) Make
 contracts.

(12) Generally
 perform all acts that are legal for a board of directors to perform.

**SEVENTH.** The board of directors shall have the power to change the location of the main office to any authorized branch within the limits of the city of Portland, Oregon, without the approval of the shareholders, or with a vote of shareholders owning two-thirds of the stock of the Association for a location outside such limits and upon receipt of a certificate of approval from the Comptroller of the Currency, to any other location within or outside the limits of the city of Portland, Oregon, but not more than thirty miles beyond such limits. The board of directors shall have the power to establish or change the location of any office or offices of the Association to any other location permitted under applicable law, without approval of shareholders, subject to approval by the Comptroller of the Currency.

**EIGHTH.** The corporate existence of this Association shall continue until termination according to the laws of the United States.

**NINTH.** The board of directors of the Association, or any shareholder owning, in the aggregate, not less than 25 percent of the stock of the Association, may call a special meeting of shareholders at any time. Unless otherwise provided by the Bylaws or the laws of the United States, or waived by shareholders, a notice of the time, place, and purpose of every annual and special meeting of the shareholders shall be given by first-class mail, postage prepaid, mailed at least 10, and no more than 60, days prior to the date of the meeting to each shareholder of record at his/her address as shown upon the books of the Association. Unless otherwise provided by the Bylaws, any action requiring approval of shareholders must be effected at a duly called annual or special meeting.

**TENTH.** These Articles of Association may be amended at any regular or special meeting of the shareholders by the affirmative vote of the holders of a majority of the stock of the Association, unless the vote of the holders of a greater amount of stock is required by law, and in that case by the vote of the holders of such greater amount; provided, that the scope of the Association's activities and services may not be expanded without the prior written approval of the Comptroller of the Currency. The Association's board of directors may propose one or more amendments to the Articles of Association for submission to the shareholders.

In witness whereof, we have hereunto set our hands this <u>11<sup>th</sup></u> of June, 1997.

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| |
|:---|
| /s/ Jeffrey T. Grubb |
| Jeffrey T. Grubb |
| /s/ Robert D. Sznewajs |
| Robert D. Sznewajs |
| /s/ Dwight V. Board |
| Dwight V. Board |
| /s/ P. K. Chatterjee |
| P. K. Chatterjee |
| /s/ Robert Lane |
| Robert Lane |

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**<u>Exhibit 2</u>**

![](tm2521130d2_ex25-1img001.jpg)

**<u>Exhibit 4</u>**

**U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION**

**<u>AMENDED AND RESTATED BYLAWS</u>**

<u>ARTICLE I</u>

<u>Meetings of Shareholders</u>

Section 1.1. <u>Annual Meeting</u>. The annual meeting of the shareholders, for the election of directors and the transaction of any other proper business, shall be held at a time and place as the Chairman or President may designate. Notice of such meeting shall be given not less than ten (10) days or more than sixty (60) days prior to the date thereof, to each shareholder of the Association, unless the Office of the Comptroller of the Currency (the "OCC") determines that an emergency circumstance exists. In accordance with applicable law, the sole shareholder of the Association is permitted to waive notice of the meeting. If, for any reason, an election of directors is not made on the designated day, the election shall be held on some subsequent day, as soon thereafter as practicable, with prior notice thereof. Failure to hold an annual meeting as required by these Bylaws shall not affect the validity of any corporate action or work a forfeiture or dissolution of the Association.

Section 1.2. <u>Special Meetings</u>. Except as otherwise specially provided by law, special meetings of the shareholders may be called for any purpose, at any time by a majority of the board of directors (the "Board"), or by any shareholder or group of shareholders owning at least ten percent of the outstanding stock.

Every such special meeting, unless otherwise provided by law, shall be called upon not less than ten (10) days nor more than sixty (60) days prior notice stating the purpose of the meeting.

Section 1.3. <u>Nominations for Directors</u>. Nominations for election to the Board may be made by the Board or by any shareholder.

Section 1.4. <u>Proxies</u>. Shareholders may vote at any meeting of the shareholders by proxies duly authorized in writing. Proxies shall be valid only for one meeting and any adjournments of such meeting and shall be filed with the records of the meeting.

Section 1.5. <u>Record Date</u>. The record date for determining shareholders entitled to notice and to vote at any meeting will be thirty days before the date of such meeting, unless otherwise determined by the Board.

Section 1.6. <u>Quorum and Voting</u>. A majority of the outstanding capital stock, represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law, but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held as adjourned without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association.

Section 1.7. <u>Inspectors</u>. The Board may, and in the event of its failure so to do, the Chairman of the Board may appoint Inspectors of Election who shall determine the presence of quorum, the validity of proxies, and the results of all elections and all other matters voted upon by shareholders at all annual and special meetings of shareholders.

Section 1.8. <u>Waiver and Consent</u>. The shareholders may act without notice or a meeting by a unanimous written consent by all shareholders.

Section 1.9. <u>Remote Meetings</u>. The Board shall have the right to determine that a shareholder meeting not be held at a place, but instead be held solely by means of remote communication in the manner and to the extent permitted by the General Corporation Law of the State of Delaware.

<u>ARTICLE II</u>

<u>Directors</u>

Section 2.1. <u>Board of Directors</u>. The Board shall have the power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by the Board.

Section 2.2. <u>Term of Office</u>. The directors of this Association shall hold office for one year and until their successors are duly elected and qualified, or until their earlier resignation or removal.

Section 2.3. <u>Powers</u>. In addition to the foregoing, the Board shall have and may exercise all of the powers granted to or conferred upon it by the Articles of Association, the Bylaws and by law.

Section 2.4. <u>Number</u>. As provided in the Articles of Association, the Board of this Association shall consist of no less than five nor more than twenty-five members, unless the OCC has exempted the Association from the twenty-five- member limit. The Board shall consist of a number of members to be fixed and determined from time to time by resolution of the Board or the shareholders at any meeting thereof, in accordance with the Articles of Association. Between meetings of the shareholders held for the purpose of electing directors, the Board by a majority vote of the full Board may increase the size of the Board but not to more than a total of twenty-five directors, and fill any vacancy so created in the Board; provided that the Board may increase the number of directors only by up to two directors, when the number of directors last elected by shareholders was fifteen or fewer, and by up to four directors, when the number of directors last elected by shareholders was sixteen or more. Each director shall own a qualifying equity interest in the Association or a company that has control of the Association in each case as required by applicable law. Each director shall own such qualifying equity interest in his or her own right and meet any minimum threshold ownership required by applicable law.

Section 2.5. <u>Organization Meeting</u>. The newly elected Board shall meet for the purpose of organizing the new Board and electing and appointing such officers of the Association as may be appropriate. Such meeting shall be held on the day of the election or as soon thereafter as practicable, and, in any event, within thirty days thereafter, at such time and place as the Chairman or President may designate. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting until a quorum is obtained.

Section 2.6. <u>Regular Meetings</u>. The regular meetings of the Board shall be held, without notice, as the Chairman or President may designate and deem suitable.

Section 2.7. <u>Special Meetings</u>. Special meetings of the Board may be called at any time, at any place and for any purpose by the Chairman of the Board or the President of the Association, or upon the request of a majority of the entire Board. Notice of every special meeting of the Board shall be given to the directors at their usual places of business, or at such other addresses as shall have been furnished by them for the purpose. Such notice shall be given at least twelve hours (three hours if meeting is to be conducted by conference telephone) before the meeting by telephone or by being personally delivered, mailed, or electronically delivered. Such notice need not include a statement of the business to be transacted at, or the purpose of, any such meeting.

Section 2.8. <u>Quorum and Necessary Vote</u>. A majority of the directors shall constitute a quorum at any meeting of the Board, except when otherwise provided by law; but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held as adjourned without further notice. Unless otherwise provided by law or the Articles or Bylaws of this Association, once a quorum is established, any act by a majority of those directors present and voting shall be the act of the Board.

Section 2.9. <u>Written Consent</u>. Except as otherwise required by applicable laws and regulations, the Board may act without a meeting by a unanimous written consent by all directors, to be filed with the Secretary of the Association as part of the corporate records.

Section 2.10. <u>Remote Meetings</u>. Members of the Board, or of any committee thereof, may participate in a meeting of such Board or committee by means of conference telephone, video or similar communications equipment by means of which all persons participating in the meeting can hear each other and such participation shall constitute presence in person at such meeting.

Section 2.11. <u>Vacancies</u>. When any vacancy occurs among the directors, the remaining members of the Board may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose.

<u>ARTICLE III</u>

<u>Committees</u>

Section 3.1. <u>Advisory Board of Directors</u>. The Board may appoint persons, who need not be directors, to serve as advisory directors on an advisory board of directors established with respect to the business affairs of either this Association alone or the business affairs of a group of affiliated organizations of which this Association is one. Advisory directors shall have such powers and duties as may be determined by the Board, provided, that the Board's responsibility for the business and affairs of this Association shall in no respect be delegated or diminished.

Section 3.2. <u>Trust Audit Committee</u>. At least once during each calendar year, the Association shall arrange for a suitable audit (by internal or external auditors) of all significant fiduciary activities under the direction of its trust audit committee, a function that will be fulfilled by the Audit Committee of the financial holding company that is the ultimate parent of this Association. The Association shall note the results of the audit (including significant actions taken as a result of the audit) in the minutes of the Board. In lieu of annual audits, the Association may adopt a continuous audit system in accordance with 12 C.F.R. § 9.9(b).

The Audit Committee of the financial holding company that is the ultimate parent of this Association, fulfilling the function of the trust audit committee:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(1) Must not include any officers of the Association or an affiliate who participate significantly in the administration of the Association's fiduciary activities; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(2) Must consist of a majority of members who are not also members of any committee to which the Board has delegated power to manage and control the fiduciary activities of the Association.

Section 3.3. <u>Executive Committee</u>. The Board may appoint an Executive Committee which shall consist of at least three directors and which shall have, and may exercise, to the extent permitted by applicable law, all the powers of the Board between meetings of the Board or otherwise when the Board is not meeting.

Section 3.4. <u>Trust Management Committee</u>. The Board of this Association shall appoint a Trust Management Committee to provide oversight of the fiduciary activities of the Association. The Trust Management Committee shall determine policies governing fiduciary activities. The Trust Management Committee or such sub-committees, officers or others as may be duly designated by the Trust Management Committee shall oversee the processes related to fiduciary activities to assure conformity with fiduciary policies it establishes, including ratifying the acceptance and the closing out or relinquishment of all trusts. The Trust Management Committee will provide regular reports of its activities to the Board.

Section 3.5. <u>Other Committees</u>. The Board may appoint, from time to time, committees of one or more persons who need not be directors, for such purposes and with such powers as the Board may determine; however, the Board will not delegate to any committee any powers or responsibilities that it is prohibited from delegating under any law or regulation. In addition, either the Chairman or the President may appoint, from time to time, committees of one or more officers, employees, agents or other persons, for such purposes and with such powers as either the Chairman or the President deems appropriate and proper. Whether appointed by the Board, the Chairman, or the President, any such committee shall at all times be subject to the direction and control of the Board.

Section 3.6. <u>Meetings, Minutes and Rules</u>. An advisory board of directors and/or committee shall meet as necessary in consideration of the purpose of the advisory board of directors or committee, and shall maintain minutes in sufficient detail to indicate actions taken or recommendations made; unless required by the members, discussions, votes or other specific details need not be reported. An advisory board of directors or a committee may, in consideration of its purpose, adopt its own rules for the exercise of any of its functions or authority.

<u>ARTICLE IV</u>

<u>Officers</u>

Section 4.1. <u>Chairman of the Board</u>. The Board may appoint one of its members to be Chairman of the Board to serve at the pleasure of the Board. The Chairman shall supervise the carrying out of the policies adopted or approved by the Board; shall have general executive powers, as well as the specific powers conferred by these Bylaws; and shall also have and may exercise such powers and duties as from time to time may be conferred upon or assigned by the Board.

Section 4.2. <u>President</u>. The Board may appoint one of its members to be President of the Association. In the absence of the Chairman, the President shall preside at any meeting of the Board. The President shall have general executive powers, and shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the office of President, or imposed by these Bylaws. The President shall also have and may exercise such powers and duties as from time to time may be conferred or assigned by the Board.

Section 4.3. <u>Vice President</u>. The Board may appoint one or more Vice Presidents who shall have such powers and duties as may be assigned by the Board and to perform the duties of the President on those occasions when the President is absent, including presiding at any meeting of the Board in the absence of both the Chairman and President.

Section 4.4. <u>Secretary</u>. The Board shall appoint a Secretary, or other designated officer who shall be Secretary of the Board and of the Association, and shall keep accurate minutes of all meetings. The Secretary shall attend to the giving of all notices required by these Bylaws to be given; shall be custodian of the corporate seal, records, documents and papers of the Association; shall provide for the keeping of proper records of all transactions of the Association; shall, upon request, authenticate any records of the Association; shall have and may exercise any and all other powers and duties pertaining by law, regulation or practice, to the Secretary, or imposed by these Bylaws; and shall also perform such other duties as may be assigned from time to time by the Board. The Board may appoint one or more Assistant Secretaries with such powers and duties as the Board, the President or the Secretary shall from time to time determine.

Section 4.5. <u>Other Officers</u>. The Board may appoint, and may authorize the Chairman, the President or any other officer to appoint, any officer as from time to time may appear to the Board, the Chairman, the President or such other officer to be required or desirable to transact the business of the Association. Such officers shall exercise such powers and perform such duties as pertain to their several offices, or as may be conferred upon or assigned to them by these Bylaws, the Board, the Chairman, the President or such other authorized officer. Any person may hold two offices.

Section 4.6. <u>Tenure of Office</u>. The Chairman or the President and all other officers shall hold office until their respective successors are elected and qualified or until their earlier death, resignation, retirement, disqualification or removal from office, subject to the right of the Board or authorized officer to discharge any officer at any time.

<u>ARTICLE V</u>

<u>Stock</u>

Section 5.1. The Board may authorize the issuance of stock either in certificated or in uncertificated form. Certificates for shares of stock shall be in such form as the Board may from time to time prescribe. If the Board issues certificated stock, the certificate shall be signed by the President, Secretary or any other such officer as the Board so determines. Shares of stock shall be transferable on the books of the Association, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to such person's shares, succeed to all rights of the prior holder of such shares. Each certificate of stock shall recite on its face that the stock represented thereby is transferable only upon the books of the Association properly endorsed. The Board may impose conditions upon the transfer of the stock reasonably calculated to simplify the work of the Association for stock transfers, voting at shareholder meetings, and related matters, and to protect it against fraudulent transfers.

<u>ARTICLE VI</u>

<u>Corporate Seal</u>

Section 6.1. The Association shall have no corporate seal; provided, however, that if the use of a seal is required by, or is otherwise convenient or advisable pursuant to, the laws or regulations of any jurisdiction, the following seal may be used, and the Chairman, the President, the Secretary and any Assistant Secretary shall have the authority to affix such seal:

<u>ARTICLE VII</u>

<u>Miscellaneous Provisions</u>

Section 7.1. <u>Execution of Instruments</u>. All agreements, checks, drafts, orders, indentures, notes, mortgages, deeds, conveyances, transfers, endorsements, assignments, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, schedules, accounts, affidavits, bonds, undertakings, guarantees, proxies and other instruments or documents may be signed, countersigned, executed, acknowledged, endorsed, verified, delivered or accepted on behalf of the Association, whether in a fiduciary capacity or otherwise, by any officer of the Association, or such employee or agent as may be designated from time to time by the Board by resolution, or by the Chairman or the President by written instrument, which resolution or instrument shall be certified as in effect by the Secretary or an Assistant Secretary of the Association. The provisions of this section are supplementary to any other provision of the Articles of Association or Bylaws.

Section 7.2. <u>Records</u>. The Articles of Association, the Bylaws as revised or amended from time to time and the proceedings of all meetings of the shareholders, the Board, and standing committees of the Board, shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the Secretary, or other officer appointed to act as Secretary of the meeting.

Section 7.3. <u>Trust Files</u>. There shall be maintained in the Association files all fiduciary records necessary to assure that its fiduciary responsibilities have been properly undertaken and discharged.

Section 7.4. <u>Trust Investments</u>. Funds held in a fiduciary capacity shall be invested according to the instrument establishing the fiduciary relationship and according to law. Where such instrument does not specify the character and class of investments to be made and does not vest in the Association a discretion in the matter, funds held pursuant to such instrument shall be invested in investments in which corporate fiduciaries may invest under law.

Section 7.5. <u>Notice</u>. Whenever notice is required by the Articles of Association, the Bylaws or law, such notice shall be by mail, postage prepaid, e- mail, in person, or by any other means by which such notice can reasonably be expected to be received, using the address of the person to receive such notice, or such other personal data, as may appear on the records of the Association.

Except where specified otherwise in these Bylaws, prior notice shall be proper if given not more than 30 days nor less than 10 days prior to the event for which notice is given.

<u>ARTICLE VIII</u>

<u>Indemnification</u>

Section 8.1. The Association shall indemnify such persons for such liabilities in such manner under such circumstances and to such extent as permitted by Section 145 of the Delaware General Corporation Law, as now enacted or hereafter amended. The Board may authorize the purchase and maintenance of insurance and/or the execution of individual agreements for the purpose of such indemnification, and the Association shall advance all reasonable costs and expenses (including attorneys' fees) incurred in defending any action, suit or proceeding to all persons entitled to indemnification under this Section 8.1. Such insurance shall be consistent with the requirements of 12 C.F.R. § 7.2014 and shall exclude coverage of liability for a formal order assessing civil money penalties against an institution-affiliated party, as defined at 12 U.S.C. § 1813(u).

Section 8.2. Notwithstanding Section 8.1, however, (a) any indemnification payments to an institution-affiliated party, as defined at 12 U.S.C. § 1813(u), for an administrative proceeding or civil action initiated by a federal banking agency, shall be reasonable and consistent with the requirements of 12 U.S.C. § 1828(k) and the implementing regulations thereunder; and (b) any indemnification payments and advancement of costs and expenses to an institution-affiliated party, as defined at 12 U.S.C. § 1813(u), in cases involving an administrative proceeding or civil action not initiated by a federal banking agency, shall be in accordance with Delaware General Corporation Law and consistent with safe and sound banking practices.

<u>ARTICLE IX</u>

<u>Bylaws: Interpretation and Amendment</u>

Section 9.1. These Bylaws shall be interpreted in accordance with and subject to appropriate provisions of law, and may be added to, altered, amended, or repealed, at any regular or special meeting of the Board.

Section 9.2. A copy of the Bylaws and all amendments shall at all times be kept in a convenient place at the principal office of the Association, and shall be open for inspection to all shareholders during Association hours.

<u>ARTICLE X</u>

<u>Miscellaneous Provisions</u>

Section 10.1. <u>Fiscal Year</u>. The fiscal year of the Association shall begin on the first day of January in each year and shall end on the thirty-first day of December following.

Section 10.2. <u>Governing Law</u>. This Association designates the Delaware General Corporation Law, as amended from time to time, as the governing law for its corporate governance procedures, to the extent not inconsistent with Federal banking statutes and regulations or bank safety and soundness.

\*\*\*

(February 8, 2021)

**<u>Exhibit 6</u>**

**CONSENT**

In accordance with Section 321(b) of the Trust Indenture Act of 1939, the undersigned, U.S. BANK TRUST COMPANY, NATIONAL ASSOCIATION hereby consents that reports of examination of the undersigned by Federal, State, Territorial or District authorities may be furnished by such authorities to the Securities and Exchange Commission upon its request therefor.

Dated: July 18, 2025

---

| | |
|:---|:---|
| By: | /s/ Jose A. Galarza |
|  | Jose A. Galarza |
|  | Vice President |

---

**<u>Exhibit 7</u>**

**U.S. Bank Trust Company, National Association**

**Statement of Financial Condition**

**as of 3/31/2025**

**($000's)**

---

| | |
|:---|:---|
|  | **3/31/2025** |
| **Assets** |  |
| &nbsp;&nbsp;&nbsp;Cash and Balances Due From | $1748785 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Depository Institutions |  |
| &nbsp;&nbsp;&nbsp;Securities | 4557 |
| &nbsp;&nbsp;&nbsp;Federal Funds | 0 |
| &nbsp;&nbsp;&nbsp;Loans & Lease Financing Receivables | 0 |
| &nbsp;&nbsp;&nbsp;Fixed Assets | 896 |
| &nbsp;&nbsp;&nbsp;Intangible Assets | 575665 |
| &nbsp;&nbsp;&nbsp;Other Assets | 156612 |
| &nbsp;&nbsp;&nbsp;**Total Assets** | $**2486515** |
| **Liabilities** |  |
| &nbsp;&nbsp;&nbsp;Deposits | $0 |
| &nbsp;&nbsp;&nbsp;Fed Funds | 0 |
| &nbsp;&nbsp;&nbsp;Treasury Demand Notes | 0 |
| &nbsp;&nbsp;&nbsp;Trading Liabilities | 0 |
| &nbsp;&nbsp;&nbsp;Other Borrowed Money | 0 |
| &nbsp;&nbsp;&nbsp;Acceptances | 0 |
| &nbsp;&nbsp;&nbsp;Subordinated Notes and Debentures | 0 |
| &nbsp;&nbsp;&nbsp;Other Liabilities | 222718 |
| &nbsp;&nbsp;&nbsp;**Total Liabilities** | $**222718** |
| **Equity** |  |
| &nbsp;&nbsp;&nbsp;Common and Preferred Stock | 200 |
| &nbsp;&nbsp;&nbsp;Surplus | 1171635 |
| &nbsp;&nbsp;&nbsp;Undivided Profits | 1091962 |
| &nbsp;&nbsp;&nbsp;Minority Interest in Subsidiaries | 0 |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;**Total Equity Capital** | $**2263797** |
| **Total Liabilities and Equity Capital** | $**2486515** |

---

## Exhibit 99.1

**Exhibit 99.1**

**NORTH CAROLINA**

**UTILITIES COMMISSION**

**RALEIGH**

DOCKET NO. E-7, SUB 1325

BEFORE THE NORTH CAROLINA UTILITIES COMMISSION

In the Matter of Joint Petition of Duke Energy Carolinas, LLC, and Duke Energy Progress, LLC, for Storm Recovery Financing Orders))) FINANCING ORDER

HEARD: Monday, April 21, 2025, at 1:00 p.m., in Commission Hearing Room 2115, Dobbs Building, 430 Salisbury Street, Raleigh, North Carolina

BEFORE: Commissioner Floyd B. McKissick, Jr., Presiding; Chair Karen M. Kemerait; and Commissioners Jeffrey A. Hughes, William M. Brawley, Tommy Tucker, and Steven J. Levitas

APPEARANCES:

For Duke Energy Carolinas, LLC:

Kathleen Hunter Richard, Duke Energy Corporation, 410 South Wilmington Street, Raleigh, North Carolina 27601

Camal O. Robinson, Duke Energy Corporation, 525 South Tyron Street, Charlotte, North Carolina 28202

Kristin M. Athens, McGuireWoods LLP, 501 Fayetteville Street, Suite 500, Raleigh, North Carolina 27601

For the Carolina Industrial Group for Fair Utility Rates II and III:

Christina D. Cress and Marianna Baggett McMurry, Ward and Smith, P.A., 127 Racine Drive, Wilmington, North Carolina 28403

For the Carolina Utility Customers Association, Inc.:

Christina D. Cress and Marianna Baggett McMurry, Ward and Smith, P.A., 127 Racine Drive, Wilmington, North Carolina 28403

For the Using and Consuming Public:

William E. H. Creech, Jennifer T. Harrod, and Anne M. Keyworth, Public Staff — North Carolina Utilities Commission, 4326 Mail Service Center, Raleigh, North Carolina 27699

BY THE COMMISSION: Section 62-172 of the North Carolina General Statutes (Storm Securitization Statute) authorizes the Commission to allow electric public utilities to securitize Storm Recovery Costs<sup>1</sup> provided that, among other things, the proposed securitization is expected to provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds.<sup>2</sup> *See* N.C. Gen. Stat. § 62-172(b)(2).

Commission Rule R8-75 provides the standards and procedures governing financing for Storm Recovery Costs pursuant to N.C.G.S. § 62-172. In particular, Commission Rule R8-75(d)(1)(i) provides that an electric public utility that decides to pursue securitization of Storm Recovery Costs by petitioning the Commission for a Financing Order must first obtain Commission review and approval of the Storm Recovery Costs proposed for financing through one of several mechanisms, including, but not limited to, a proceeding for the purpose of review and approval of Storm Recovery Costs to determine if they were prudently incurred, *i.e.,* a "prudency review."

This matter is before the Commission on a Joint Petition for Financing Orders (Financing Orders Petition) brought by Duke Energy Carolinas, LLC (DEC), along with Duke Energy Progress, LLC (DEP, and together with DEC, Duke), under the Storm Securitization Statute.

**PROCEDURAL HISTORY**

**Prudency Review Proceeding**

On December 2, 2024, in Docket Nos. E-7, Sub 1321 and E-2, Sub 1362, DEC and DEP filed a Joint Petition for Expedited Review and Approval of Storm Recovery Costs (Prudency Review Petition), which requested that the Commission grant authorization for the review and approval of Duke's Storm Recovery Costs (Prudency Review Proceeding), pursuant to Commission Rule R8-75.

On February 11, 2025, DEC, DEP, and the Public Staff filed an agreement and stipulation of settlement settling issues relevant to the Prudency Review Petition as well as the present proceeding regarding Duke's Financing Orders Petition.

<sup>1</sup> *See* N.C.G.S. § 62-172(a)(16). Capitalized terms not otherwise defined herein shall have the meaning assigned to them in N.C.G.S. § 62-172.

<sup>2</sup> *See* N.C.G.S. § 62-172(a)(14).

On February 12, 2025, DEC, DEP, the Public Staff, the Carolina Industrial Group for Fair Utility Rates II (CIGFUR II) and III (CIGFUR III) (together, CIGFUR), and the Carolina Utility Customers Association, Inc. (CUCA), filed an amended agreement and stipulation of settlement (Prudency Review Stipulation).

On April 16, 2025, the Commission issued an order in the Prudency Review Proceeding approving DEC and DEP's Prudency Review Petition, approving the Prudency Review Stipulation in its entirety, and determining that approximately $584 million of DEC's Storm Recovery Costs are eligible to be recovered using securitization. Order Accepting Stipulation and Approving Storm Recovery Costs, *Joint Petition of Duke Energy Carolinas, LLC, and Duke Energy Progress, LLC for Expedited Review and Approval of Storm Recovery Costs*, Nos. E-7, Sub 1321, E-2, Sub 1362 (N.C.U.C. Apr. 16, 2025) (Prudency Review Order). The Commission determined that DEC's Storm Costs (as defined therein) were just and reasonable and prudently incurred to the extent such costs represent actual amounts of $584 million as of 2025, under Rule R8-75(d). Prudency Review Order at 30.

**Financing Order Proceeding**

On February 3, 2025, in the above-captioned docket as well as in Docket No. E-2, Sub 1370, DEC and DEP filed a Joint Petition for Financing Orders (Financing Orders Petition), which requested that the Commission grant authorization for the financing of Duke's Storm Recovery Costs using a securitization structure authorized by N.C.G.S. § 62-172 and the establishment of storm reserves.<sup>3</sup> Along with the Financing Orders Petition, Duke filed the direct testimony and exhibits of Thomas J. Heath, Jr., Corporate Finance Director, DEBS; Vincent Cimino, Managing Director of RBC Capital Markets, LLC; Jacalyn H. Moore, Rates and Regulatory Strategy Manager, DEBS; LaWanda M. Jiggetts, Rates & Regulatory Strategy Director, DEC; and Nicholas Speros, Director of Accounting, DEBS. Along with the Financing Orders Petition, identified as Financing Orders Petition Exhibit A, DEC submitted a proposed Financing Order.

In the Financing Orders Petition, DEC requested that the Commission issue an order (Financing Order) permitting DEC to recover significant storm expenditures that it incurred because of Hurricanes Zeta, Helene, Debby, Ian, and Winter Storm Izzy (collectively, Storms), and to establish storm reserves. Specifically, DEC sought the following: (1) authorization to finance its Securitizable Balance;<sup>4</sup> (2) approval of the proposed securitization financing structure; (3) approval to issue Storm Recovery Bonds, secured by the pledge of Storm Recovery Property,<sup>5</sup> in one or more series in an aggregate principal amount not to exceed the relevant Securitizable Balance (as of the date the first series of Storm Recovery Bonds are issued); (4) for approval of the Financing Costs,<sup>6</sup> including up-front Financing Costs and ongoing Financing Costs, incurred in connection with the issuance of Storm Recovery Bonds; (5) for approval to create Storm Recovery Property, including the right to (a) impose, bill, charge, collect, and receive nonbypassable Storm Recovery Charges sufficient to recover the principal of, and interest on, the Storm Recovery Bonds plus ongoing Financing Costs; and (b) obtain periodic formulaic adjustments to the Storm Recovery Charge as provided in this Financing Order; and (6) for approval of the tariff to implement the Storm Recovery Charge (Tariff).

<sup>3</sup> *See* N.C.G.S. § 62-172(a)(16)b.

<sup>4</sup> *See* Finding of Fact No. 6 defining Securitizable Balance.

<sup>5</sup> *See* N.C.G.S. § 62-172(a)(17).

<sup>6</sup> *See* N.C.G.S. § 62-172(a)(6).

On February 25, 2025, DEC and DEP filed the Supplemental Direct Testimony and Exhibits of Jiggetts, Heath, and Moore (Supplemental Testimony).

On March 26, 2025, DEC and DEP filed the Corrected Supplemental Direct Testimony and Exhibits of Jiggetts (Corrected Supplemental).

On April 1, 2025, the Public Staff filed the Joint Testimony of Michael Bartolotta, Michael Newman, and Chaffin Snider, and the Joint Testimony of Darrus Cofield, Hemanth Meda, and Fenge Zhang.

On April 11, 2025, Duke filed the Rebuttal Testimony of Jiggetts and Speros and Heath.

On April 15, 2025, DEC, DEP, and the Public Staff filed an agreement and stipulation of settlement settling all issues in this case.

On April 17, 2025, DEC, DEP, the Public Staff, CIGFUR, and CUCA (collectively, Stipulating Parties) filed an amended to agreement and stipulation of settlement (Financing Order Stipulation) to include CUCA and CIGFUR.

The Commission held a hearing on April 21, 2025, for the purpose of receiving expert witness testimony regarding the Financing Orders Petition. DEC presented the testimony of witnesses Heath, Cimino, Moore, Speros and Jiggetts. The Public Staff presented the testimony of witnesses Bartolotta, Newman, Snider, Cofield, Meda, and Zhang.

On May 12, 2025, the Stipulating Parties unanimously filed a Joint Proposed Financing Order applicable to DEC's Financing Order Petition.

**STANDARD OF REVIEW**

**Procedure Before the Commission**

Pursuant to Chapter 62 of the North Carolina General Statutes, the Public Utilities Act, "[f]or the purpose of conducting hearings, making decisions and issuing orders, and in formal investigations where a record is made of testimony under oath, the Commission shall be deemed to exercise functions judicial in nature." N.C.G.S. § 62-60. In conducting this proceeding, the Commission has acted in a judicial capacity by conducting hearings to receive evidence, including expert witness testimony under oath, developing a record of evidence, and making its decisions based on that record, consistent with its authority pursuant to N.C.G.S. § 62-60.

When acting in a judicial capacity, the Commission must apply the rules of evidence "insofar as practicable[.]" N.C.G.S. § 62-65(a). "All evidence, including records and documents in the possession of the Commission of which it desires to avail itself, shall be made a part of the record in the case by definite reference thereto at the hearing." *Id*. Ultimately, the Commission must base its decisions upon competent, material, and substantial evidence it derives through consideration of the whole record. *Id.*

**Stipulations**

Section 62-69 of the Public Utilities Act states that "[i]n all contested proceedings the Commission . . . shall encourage the parties and their counsel to make and enter stipulations." N.C.G.S. § 62-69(a). Stipulations are encouraged, among other reasons, to clarify issues of fact and law when deemed to be expedient and in the public interest by the Commission. *Id*. Stipulations that are entered into by all of the parties before the Commission may form the basis of informal disposition of a contested proceeding under N.C.G.S. § 62-69(a). *State ex rel. Utils. Comm'n v. Cooper*, 366 N.C. 484, 739 S.E.2d 541 (2013).

**Statutory Cost Objectives**

As stated above, the Storm Securitization Statute authorizes the Commission to allow electric public utilities to securitize Storm Recovery Costs provided that, among other things, the proposed securitization is expected to provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds.<sup>7</sup> Accordingly, to approve DEC's Financing Order Petition and the Financing Order Stipulation, the Commission must find that, based upon competent, material, and substantial evidence in the whole record, securitizing the Storm Recovery Costs is expected to provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds. The Storm Securitization Statute also requires that the Commission make a finding that the structuring and pricing of the Storm Recovery Bonds are reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in the Financing Order. N.C.G.S. § 62-172(b)(3)b.3.

WHEREUPON, the Commission makes the following

**FINDINGS OF FACT**

**Jurisdiction**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. DEC is duly organized as a public utility operating under the laws of the State of North Carolina and is subject to the jurisdiction of the Commission. DEC is engaged in the business of generating, transmitting, distributing, and selling electric power and energy to the public in the greater Charlotte, Durham, Greensboro, and Winston-Salem areas. DEC is a wholly owned subsidiary of Duke Energy Corporation, and its office and principal place of business is located in Charlotte, North Carolina.

<sup>7</sup> *See* N.C.G.S. § 62-172(a)(14).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. Under Chapter 62 of the General Statutes of North Carolina, the Commission has jurisdiction over the rates and charges, rate schedules, classifications, and practices of DEC regarding its North Carolina operations.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. DEC is lawfully before the Commission based upon its petition for a Financing Order pursuant to N.C.G.S. §§ 62-133 and 62-172 and Commission Rule R1-17.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Securitization Statute was enacted on November 6, 2019. This Financing Orders Petition by Duke is the second petition by Duke pursuant to the Securitization Statute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. DEC has previously issued $237 million of Storm Recovery Bonds in November 2021 pursuant to the Securitization Statute (2021 DEC Transaction) and DEP has previously issued $770 million of Storm Recovery Bonds in November 2021 pursuant to the Securitization Statute (with 2021 DEP Transaction, 2021 NC Transactions).

**Financing Orders Petition**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. In the Financing Orders Petition, DEC requested authority to issue Storm Recovery Bonds in one or more series<sup>8</sup> in the amount of up to approximately $842.64 million, which consists of $597.47 million of operating and maintenance (O&M) and capital costs plus $200 million in storm reserves and $38.03 million of carrying costs from the date of the Storms through the issuance date of the Storm Recovery Bonds (Carrying Costs),<sup>9</sup> calculated at the relevant weighted average cost of capital (WACC) approved by the Commission and cost of debt associated with special term financing for Hurricanes Debby and Helene (Carrying Costs Calculation), plus up-front Financing Costs of issuing the Storm Recovery Bonds of approximately $7.14 million. The up-front Financing Costs are subject to change and update prior to the pricing of the Storm Recovery Bonds plus or minus any adjustment to Carrying Costs necessary to account for the number of days, as applicable, either greater than or less than assumed in the Carrying Cost Calculation based on the projected issuance date for the Storm Recovery Bonds. This amount, as updated through the Issuance Advice Letter process described in Finding of Fact No. 48, is referred to herein as the Securitizable Balance. The Financing Orders Petition meets the requirements for a petition for a Financing Order set forth under N.C.G.S. § 62-172(b)(1).

<sup>8</sup> DEC requests the ability to issue the Storm Recovery Bonds in multiple series should it be advantageous towards achieving the Statutory Cost Objectives (as defined herein).

<sup>9</sup> This amount assumes the Storm Recovery Bonds are issued on November 1, 2025, which was Duke's projected date of issuance at the time they filed the Joint Petition.

**Prudency Review Order**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. In the Prudency Review Order, the Commission approved the total reasonable and prudent Storm Recovery Costs eligible for recovery using securitization as approximately $583.53 million for DEC consisting of: (a) incremental O&M incurred as a result of the Storms of $351.32 million; (b) capital costs, including applicable carrying charges, associated with Hurricane Helene of $207.56 million; and (c) accrued carrying costs of $24.65 million calculated at the applicable after tax cost of debt.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. In addition, pursuant to the Prudency Review Order, DEC may update the estimated carrying costs component being approved in order to account for any difference in carrying costs resulting from DEC's estimated date of issuance and actual date of issuance.

**Financing Order Stipulation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. On April 15, 2025, DEC, DEP, and the Public Staff filed the Financing Order Stipulation resolving all of the issues between DEC, DEP, and the Public Staff in this proceeding, including the up-front Financing Costs, ongoing Financing Costs, servicing and administration fees, Tail-end Collections (as defined in Finding of Fact No. 19), capital contributions, and the Public Staff consultant's statutory benefits confirmation letter. On April 17, 2025, the Stipulating Parties filed an amendment to the Financing Order Stipulation to include CUCA and CIGFUR.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. The Financing Order Stipulation is the product of give-and-take in settlement negotiations between DEC, DEP, the Public Staff, CUCA, and CIGFUR, is material evidence in this proceeding, and is entitled to be given appropriate weight in this proceeding.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. The provisions of the Financing Order Stipulation are just and reasonable to all parties to this proceeding and serve the public interest.

**Costs Eligible for Recovery Through Securitization** 

***Storm Recovery Costs***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. Consistent with the Commission's findings and conclusions in the Prudency Review Order, Storm Recovery Costs of up to approximately $583.53 million, subject to adjustments including the final amount of carrying costs through the issuance date of the Storm Recovery Bonds, are eligible for recovery through securitization.<sup>10</sup> No storm reserves will be financed through the Storm Recovery Bonds.

***Up-front Financing Costs***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. DEC's proposed up-front Financing Costs, revised in its Supplemental Testimony, in the estimated amount of $5.80 million, subject to adjustment in the Issuance Advice Letter that DEC will file with the Commission after the Storm Recovery Bonds are priced, and as described in Finding of Fact No. 48, are reasonable and prudent and eligible for recovery through securitization.

<sup>10</sup> *See* Prudency Review Order at 30.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. The agreement between the Stipulating Parties to establish a regulatory asset for the undercollection of prudently incurred up-front Financing Costs or to establish a regulatory liability to return any overcollection of prudently incurred up-front Financing Costs in DEC's next general rate case as compared to the amounts appearing in the Issuance Advice Letter, as set forth in the Financing Order Stipulation, is just and reasonable to all parties in light of all of the evidence presented.

***Ongoing Financing Costs***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. The ongoing Financing Costs identified in DEC's Supplemental Testimony and in Attachment 4 of the form Issuance Advice Letter (Appendix C hereto), estimated to be approximately $786,000 annually, subject to update and adjustment in the Issuance Advice Letter as described in this Order, are reasonable and prudent and qualify as Financing Costs eligible for recovery pursuant to N.C.G.S. § 62-172(a)(6).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. The provisions of the Financing Order Stipulation regarding the audit of ongoing Financing Costs and standards for resolution of potential disputed amounts are just and reasonable to all parties in light of all of the evidence presented.

***Servicing and Administration Fees***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. The provisions regarding establishment of a regulatory asset or liability, separate and apart from the regulatory assets and liabilities of other types of securitization related costs and benefits, for the purpose of tracking of servicing and administration fees received by DEC from the Special Purpose Entity (SPE) that issues the Storm Recovery Bonds and the incremental costs incurred by DEC in fulfilling the required functions under the servicing and administration agreements of the Financing Order Stipulation are just and reasonable to all parties in light of all of the evidence presented.

***Capital Contributions***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. The agreement between the Stipulating Parties that DEC's capital contribution to the DEC SPE shall earn a return at the interest rate of the longest maturing tranche of the Storm Recovery Bonds, provided, however that such rate shall not exceed DEC's after-tax WACC approved by the Commission in Docket No. E-7, Sub, 1214, is just and reasonable to all parties in light of all of the evidence presented.

**Tail-end Collections**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. The provisions in the Financing Order Stipulation regarding collections of Storm Recovery Charges after the Storm Recovery Bonds and all related Financing Costs have been repaid in full (Tail-end Collections) are just and reasonable to all parties in light of all of the evidence presented.

**Structure of Issuance**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20. DEC's proposed financing structure adheres to the requirements of the Securitization Statute.

***Special Purpose Entities***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21. For purposes of securitization it is reasonable for DEC to create one or more SPEs,<sup>11</sup> each of which will be a Delaware limited liability company (LLC) with DEC as its sole member. Any such DEC SPE will be an "assignee" as defined in N.C.G.S. § 62-172(a)(2), and when an interest in Storm Recovery Property is transferred, other than as security, to such DEC SPE, such DEC SPE may issue Storm Recovery Bonds in accordance with this Financing Order.

***Storm Recovery Property***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22. It is reasonable for DEC to sell or otherwise transfer Storm Recovery Property to the DEC SPE pursuant to the terms of this Financing Order. Upon the transfer by DEC of the Storm Recovery Property to the DEC SPE, the DEC SPE will have all of the rights, title, and interest of DEC with respect to such Storm Recovery Property, including the right to impose, bill, charge, collect, and receive the Storm Recovery Charge authorized by this Financing Order and to obtain periodic formulaic adjustments to each Storm Recovery Charge. Such Storm Recovery Property is expected to be pledged by the DEC SPE to be held and administered by an indenture trustee as collateral for payment of the Storm Recovery Bonds to ensure that: (1) the proposed issuance of Storm Recovery Bonds and the imposition of Storm Recovery Charges will provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds; and (2) the structuring, marketing, and pricing of the Storm Recovery Bonds are reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order (collectively, Statutory Cost Objectives).

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23. The State of North Carolina and its agencies, including the Commission, have pledged to and agree with bondholders, the owners of Storm Recovery Property, and other financing parties that the State and its agencies, including the Commission, will not alter the provisions of the Securitization Statute, which authorize the Commission to create Storm Recovery Property or take or permit any action that impairs the value of the Storm Recovery Property, as further described in N.C.G.S. § 62-172(k)(1).

<sup>11</sup> For purposes of this Financing Order, all references to the DEC SPE shall include any DEC SPE that is created to recover the Securitizable Balance pursuant to this Financing Order.

***Form of Transaction Documents***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24. The forms of the purchase and sale agreement, administration agreement, limited liability company agreement, indenture, and the servicing agreement, originally filed as exhibits to witness Thomas J. Heath Jr.'s testimony, (collectively, Transaction Documents) are in the public interest and necessary to facilitate the transaction and are approved, subject to Finding of Fact No. 25 that follows.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25. It is reasonable and appropriate for any modifications to the Transaction Documents to be reviewed by the Bond Advisory Team, defined below in Finding of Fact No. 44, for compliance with the terms of this Financing Order.

***Offering and Sale of Bonds***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26. It is reasonable for DEC to issue the Storm Recovery Bonds through a negotiated sale or other sales option to achieve the Statutory Cost Objectives.

***Amortization of Storm Recovery Bonds***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27. DEC's proposal related to the length of the bond period is just and reasonable to all parties in light of all of the evidence presented. The expected term of the scheduled final payment date of the last maturing tranche of bonds issued pursuant to the authority granted herein, as determined in the reasonable discretion of DEC, is to be approximately 20 years from the issuance of the series of Storm Recovery Bonds. The legal maturity date of each tranche may be longer than the scheduled final payment date for that tranche.

***Interest Rates of Storm Recovery Bonds***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28. It is appropriate for each tranche of the Storm Recovery Bonds to have a fixed interest rate, determined consistent with current market conditions. If market conditions change and it becomes necessary, in order to best achieve the Statutory Cost Objectives, for one or more tranches of bonds to be issued in floating-rate mode, DEC is authorized to issue such bonds but will be required to execute agreements to swap the floating payments to fixed-rate payments to achieve the Statutory Cost Objectives.

***Credit Ratings of Storm Recovery Bonds***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29. DEC should strive for the Storm Recovery Bonds to achieve AAA credit ratings or the equivalent highest credit ratings given for the type of securities the DEC SPE issues consistent with its overarching obligation to meet the Statutory Cost Objectives. DEC should agree to the necessary credit enhancements, with recovery of related costs as ongoing Financing Costs, to achieve such ratings, if and to the extent such credit enhancements and corresponding credit ratings are warranted in order to meet the Statutory Cost Objectives. The cost of any such credit enhancements shall be included in the determination of whether the Statutory Cost Objectives are met.

***Security for Storm Recovery Bonds***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30. The utilization by DEC's SPE of a collection account, including a general subaccount, a capital subaccount, and an excess funds subaccount, is reasonable and appropriate. DEC may include other subaccounts in the collection account, if necessary to obtain AAA ratings on a series of Storm Recovery Bonds.

***DEC as Initial Servicer of the Storm Recovery Bonds***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31. DEC's proposal to act as initial servicer of the Storm Recovery Bonds is reasonable and appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32. The ongoing annual servicing fee for DEC, acting as the initial servicer, in the amount of 0.05 percent of the initial principal amount of the Storm Recovery Bonds plus out-of-pocket expenses provided for in the servicing agreement is necessary to compensate the servicer adequately and ensure the high credit quality of the Storm Recovery Bonds and is reasonable and appropriate.

***DEC as Administrator of the DEC SPE***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;33. DEC's proposal to act as an administrator of the DEC SPE under the proposed financing transaction is reasonable and appropriate.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34. The ongoing fee to be paid to the administrator of $50,000 per year plus out-of-pocket expenses included in the administration agreement is necessary to cover the costs and expenses of administering the DEC SPE and to preserve the integrity of the bankruptcy-remote structure of the DEC SPE and the high credit quality of the Storm Recovery Bonds and is reasonable and appropriate.

***Storm Recovery Bonds to be Treated as Debt for Federal Income Tax Purposes***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;35. DEC shall structure the Storm Recovery Bond transactions in a way that meets all requirements for the Internal Revenue Service's (IRS) safe harbor treatment provided for in IRS Rev. Proc. 2005-62, 2005-2 C.B. 507, as modified by Revenue Procedure 2024-15, 2024-12 I.R.B. 717 (IRS Revenue Procedure).

**Storm Recovery Charges**

***Imposition and Computation of Storm Recovery Charges***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;36. To repay the Storm Recovery Bonds and ongoing Financing Costs, DEC is authorized to impose Storm Recovery Charges to be collected on a per-kWh basis from all applicable customer rate classes until the Storm Recovery Bonds and related Financing Costs are paid in full.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;37. The Securitizable Balance to be financed using Storm Recovery Bonds shall be determined in accordance with the calculation shown in Appendix A to this Financing Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;38. The proposed allocation methodology of the Storm Recovery Charges is based upon DEC's approved allocation methodology in the proposed Tariff and is just and reasonable. It is just and reasonable that the Storm Recovery Charges be adjusted for any changes to the customer allocation methodology approved by the Commission in subsequent general rate proceedings for DEC.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;39. The State of North Carolina and its agencies, including the Commission, have pledged to and agree with bondholders, the owners of the Storm Recovery Property, and other financing parties that the State and its agencies, including the Commission, will not, except for changes made pursuant to the True-up Mechanism (as defined in Finding of Fact No. 43), reduce, alter, or impair the Storm Recovery Charges until any and all principal, interest, premium, Financing Costs, and other fees, expenses, or charges incurred, and any contracts to be performed in connection with the Storm Recovery Bonds have been paid and performed in full, as further described in N.C.G.S. § 62-172(k)(1)d.

***Treatment of Storm Recovery Charge in Tariff and on Retail Customer Bills***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;40. DEC's proposed tariff implementing the Storm Recovery Charge (Tariff) indicates the Storm Recovery Charge and the ownership of the charge.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;41. DEC is authorized to include the Storm Recovery Charge on each customer's bill as a separate line item in accordance with the Securitization Statute. DEC will include both the rate and the amount of the Storm Recovery Charge on each bill as well as a statement that the SPE is the owner of the rights to the Storm Recovery Charges and that DEC is acting as a servicer for the SPE. DEC will discuss the bill presentation of the Storm Recovery Charge with the Bond Advisory Team to ensure compliance with the Securitization Statute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;42. If any customer does not pay the full amount it has been billed, the amount collected will be prorated among all charge categories, including the Storm Recovery Charges and any other storm recovery charges approved by the Commission and charges of DEC, in proportion to their percentage of the overall bill.

***True-up of Storm Recovery Charges***

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;43. The formulaic true-up mechanism (True-up Mechanism) and associated procedures described in DEC's Tariff, which are attached to this Order as Appendix B, are reasonable and appropriate.

**Bond Advisory Team Composition and Decision-Making**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;44. In order to the ensure that the structuring, marketing, and pricing of the Storm Recovery Bonds are reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order, it is reasonable to create an advisory body that includes members who can provide representation of ratepayer interests (Bond Advisory Team) per Rule R8-75. It is further reasonable and appropriate that decisions regarding the structuring, marketing, and pricing of the Storm Recovery Bonds will be made by DEC, with input and advice from the other members of the Bond Advisory Team. It is reasonable and appropriate that the Bond Advisory Team comprise representatives of DEC, the Commission, and the Public Staff. DEC, the Commission, and the Public Staff may designate staff, counsel, and consultants to participate on the Bond Advisory Team on their behalf.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;45. It is reasonable for DEC to provide all members of the Bond Advisory Team with timely information to allow the members of the Bond Advisory Team to be fully informed and in advance regarding all aspects of the structuring, marketing, and pricing of the Storm Recovery Bonds. It is reasonable for the Bond Advisory Team to be present during communications with underwriters, credit rating agencies and investors. It is reasonable for DEC to invite all members of the Bond Advisory Team to join all Bond Advisory Team meetings to review and comment on all aspects of the structuring, pricing, and marketing of the Storm Recovery Bonds, including without limitation the following: the selection and retention of underwriters and other transaction participants; the terms of all Transaction Documents; the length of the bond terms; the interest rates of the bonds (including whether the interest rate is floating or fixed); the capitalization of the bonds; the transaction structure; the issuance strategy; appropriate credit enhancements; and the credit rating process.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;46. Per Rule R8-75, it is reasonable and appropriate for DEC to have the sole right to select all counsel and advisors for DEC, the DEC SPE, and the underwriters.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;47. Per Rule R8-75, the Public Staff, the Public Staff's designees, the Commission, and the Commission's designees are not agents of Duke or the DEC SPEs. They are not issuers, sponsors, or depositors of the Storm Recovery Bonds. Their role on the Bond Advisory Team is to provide advice and input that is independent of DEC.

**Issuance Advice Letter**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;48. Because the actual structure and pricing of the Storm Recovery Bonds are unknown as of the issuance of this Financing Order, following determination of the final terms of the Storm Recovery Bonds and before issuance of the Storm Recovery Bonds, it is just, reasonable, and appropriate for DEC to file with the Commission an Issuance Advice Letter, as well as a form of True-up Adjustment Letter in the forms attached hereto as Appendices B and C. It is reasonable for DEC to provide the Issuance Advice Letter and True-up Adjustment Letter to the Commission no later than one business day after pricing so that the Commission can determine whether the Storm Recovery Bonds comply with the requirements set out in this Financing Order and thus may be issued. The initial Storm Recovery Charges and the final terms of the Storm Recovery Bonds described in the Issuance Advice Letter and True-up Adjustment Letter will be final unless, before noon on the third business day after pricing, the Commission issues an order finding that the proposed issuance does not comply with the terms of this Financing Order, including any of the following requirements:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) That the issuance of Storm Recovery Bonds and imposition and collection of Storm Recovery Charges as authorized
in this Financing Order provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance
of Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) That the aggregate principal amount of Storm Recovery Bonds issued not exceed the Securitizable Balance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(c) That the Storm Recovery Bonds be issued in one or more series composed of one or more tranches having
scheduled final payment date of no longer than 20 years;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(d) That DEC has made its best efforts, consistent with achieving the Statutory Cost Objectives for the Storm
Recovery Bonds, to have received a rating of AAA (or the equivalent highest credit ratings given) from at least two major rating agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(e) That the Storm Recovery Bonds be structured to achieve substantially level debt service payments on an
annual basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(f) That the issuance of the Storm Recovery Bonds be structured in accordance with IRS Revenue Procedure;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(g) That the structuring, marketing, and pricing of the Storm Recovery Bonds, result in the lowest Storm Recovery
Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order,
including if applicable, the issuance of certain of the Storm Recovery Bonds at floating interest rates and the associated credit enhancements
and interest rate swaps.

**Certifications and Opinions**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;49. It is just and reasonable that no later than the date the Issuance Advice Letter is filed, each lead underwriter of the Storm Recovery Bonds shall file with the Commission an independent certification confirming that the structuring, marketing, and pricing of the Storm Recovery Bonds in fact resulted in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;50. It is just and reasonable that no later than the date the Issuance Advice Letter is filed, the Public Staff's consultant shall file a letter opining whether the structuring, marketing, and pricing of the Storm Recovery Bonds in fact resulted in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order. That letter shall include a report of any action or inaction which the Public Staff's consultant believes caused the transaction or transactions not to achieve the lowest Storm Recovery Charges.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;51. Pursuant to N.C.G.S. § 62-172(n), the Commission has the discretion to engage an outside consultant and counsel subject to the conditions stated herein.

**Flexibility**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;52. It is reasonable and appropriate to allow DEC, in consultation with the Bond Advisory Team as described in Findings of Fact Nos. 44–47 and the Issuance Advice Letter and certification procedures described in Findings of Fact Nos. 48–51, flexibility in establishing the final terms and conditions of the Storm Recovery Bonds and therefore the ability, at its option, to cause one or more series of Storm Recovery Bonds to be issued, in order to achieve the Statutory Cost Objectives.

**Statutory Cost Objectives**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;53. The issuance of Storm Recovery Bonds and imposition and collection of Storm Recovery Charges as authorized in this Financing Order are expected to provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;54. When performed in compliance with the terms of this Financing Order, the structuring, marketing, and pricing of the Storm Recovery Bonds are reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order.

**Potential Corporate Consolidation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;55. In the event of a corporate consolidation between DEC and DEP, Duke shall file with the Commission a proposal for the treatment of the Storm Recovery Charge and the ongoing administration of the Storm Recovery Bonds for Commission approval. The proposal shall ensure continued compliance with the terms of this Financing Order and the Securitization Statute. Any necessary adjustments resulting from the Commission-approved approach, including administrative modifications or true-up adjustments, shall be addressed in accordance with this Financing Order, the Securitization Statute and any other applicable law. The proposal will not be made in this docket and shall be subject to appropriate proceedings allowing for discovery and evidentiary presentations by the Public Staff and intervenors. The Commission's review of any such submission shall be conducted in a manner that ensures compliance with the Securitization Statute and the recovery of revenues sufficient to timely pay principal of and interest on the Storm Recovery Bonds, as well as ongoing Financing Costs. Nothing in this Finding of Fact shall be construed to alter or impair and no action taken pursuant hereto shall alter or impair the rights of Storm Recovery Bondholders or the enforceability of the Storm Recovery Property as established under this Financing Order and applicable law, including the Securitization Statute.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;56. In the event of a corporate consolidation between DEC and DEP, the merged entity shall be deemed a successor servicer, and the Storm Recovery Charge shall continue to be administered in a manner consistent with this Financing Order, applicable law, including the Securitization Statute, and any Commission-approved adjustments.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 1–5** 

**Jurisdiction**

The evidence supporting these findings of fact is contained in the verified Financing Orders Petition, the testimony and exhibits of the witnesses, and the entire record in this proceeding. These findings and conclusions are informational, procedural, and jurisdictional in nature, and are not contested by any party.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 6–8**

**Financing Orders Petition and Prudency Review Order**

The evidence supporting these findings of fact is contained in the Financing Orders Petition, the direct and supplemental testimony of DEC witness Jiggetts, and the entire record in this proceeding and the Prudency Review Proceeding.

The Financing Orders Petition included a description of DEC's storm recovery activities, an estimate of the Storm Recovery Costs, the proposed level of storm reserves, an indicator of the amount of Storm Recovery Costs to be financed using Storm Recovery Bonds, an estimate of the Financing Costs related to the bonds, an estimate of the Storm Recovery Charges necessary to recover costs, and a comparison between the net present value of the cost to customers estimated to result from the issuance of Storm Recovery Bonds and the cost that would result from the application of the traditional method of financing and recovering its Storm Recovery Costs. As illustrated in the direct and supplemental testimony of Duke witness Jiggetts, DEC provided evidence that issuance of Storm Recovery Bonds and the imposition of Storm Recovery Charges are expected to provide quantifiable benefits to customers.

The Prudency Review Order adjusted the Storm Recovery Costs eligible for securitization and removed the storm reserves, which will be discussed during the next general rate case of DEC.

The Commission concludes that the Financing Orders Petition (with adjustments based on the Prudency Review Order) satisfies the requirements of the Securitization Statute and Rule R8-75, as discussed further herein, by including each of the necessary items required by N.C.G.S. § 62-172(b)(1). Therefore, pursuant to the Securitization Statute and Rule R8-75, the Commission has jurisdiction to consider the Financing Orders Petition and the information necessary to issue a Financing Order as well as any other relief necessary for DEC to finance its Storm Recovery Costs.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 9–11**

**Financing Order Stipulation**

The evidence supporting these findings of fact is contained in the Financing Order Stipulation, the testimony and exhibits of Duke witnesses Heath, Jiggetts, Speros, and Moore, , the testimony and exhibits of Public Staff witnesses Cofield, Meda, Zhang, Bartolotta, Newman, and Snider, and the entire record in this proceeding.

The Stipulating Parties entered into the Financing Order Stipulation, which resolved all issues between Duke and the Public Staff. Duke witnesses Heath, Jiggetts, Speros, and Moore and Public Staff witnesses Cofield, Meda, Zhang, Bartolotta, Newman, and Snider testified in support of the settlement, and stated that its approval was in the public interest. Tr. at 187, 205, 225, 484–85, 503, 515–16. Public Staff witnesses Zhang and Newman testified that the settlement was the result of negotiations and give-and-take between the parties. *Id.* at 499, 517; Securitization Stip. § III.

As the Financing Order Stipulation has been adopted by all the parties, its acceptance by the Commission is governed by the standards set out by the North Carolina Supreme Court. *See, e.g*., *State ex rel., Utils. Comm'n v. Cooper*, 366 N.C. 484, 739 S.E.2d 541 (2013) (*Cooper*). In *Cooper*, the Supreme Court held that "'only those stipulations that are entered into by all of the parties before the Commission may form the basis of informal disposition of a contested proceeding under section 62-69(a) . . . .'" 366 N.C. at 492 (quoting *State ex rel. Utils. Comm'n v. Carolina Util. Customers Ass'n,* 348 N.C. 452, 466, 500 S.E.2d. 693, 703 (1998)).

The Commission gives substantial weight to the testimony of the Duke and Public Staff witnesses in support of the Financing Order Stipulation as well as the participation by CIGFUR and CUCA, which along with DEC, DEP, and the Public Staff, makes the Financing Order Stipulation unanimous. The Commission notes that the Financing Order Stipulation was entered into by the Stipulating Parties after discovery and negotiations, and that it represents a proposed negotiated resolution of matters in dispute between the Stipulating Parties in this docket. The Commission finds that the Financing Order Stipulation is the product of the give-and-take between the Stipulating Parties during their settlement negotiations. The Commission further finds that the Financing Order Stipulation constitutes competent, material, and substantial evidence.

As is discussed above, N.C.G.S. § 62-69(a) encourages stipulations to clarify issues of fact and law when deemed to be expedient and in the public interest by the Commission. In addition, "Stipulations that are entered into by all of the parties before the Commission may form the basis of informal disposition of a contested proceeding under N.C.G.S. § 62-69(a)." *Cooper*, 366 N.C. at 392, 739 S.E.2d at 546.

While the Commission explains the weight given to the evidence supporting the individual substantive components of the Financing Order Stipulation in greater detail below, based on the foregoing, the Commission concludes, in the exercise of its independent judgment, that the provisions of the Financing Order Stipulation are just and reasonable to all parties to this proceeding in light of the evidence presented and serve the public interest. Therefore, the Commission adopts the Financing Order Stipulation in its entirety, and the conclusions specific to the individual provisions of the Financing Order Stipulation are set forth more fully below.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 12–18** 

**Cost Eligible for Recovery Through Securitization**

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the Financing Order Stipulation, the direct and supplemental testimony and exhibits of the witnesses, and the entire record in this proceeding.

***Storm Recovery Costs***

In DEC's Supplemental Direct Testimony, which reflects the terms agreed to in the Prudency Review Stipulation, DEC requested the authority to finance its Storm Recovery Costs through securitization of approximately $589.33 million in Storm Recovery Costs, which includes $558.88 million in O&M and capital costs, plus carrying costs in the amount of $24.65 million (plus or minus any adjustment to such carrying costs necessary to account for the number of days, as applicable, either greater than or less than assumed in the carrying costs calculation), plus an estimated $5.80 million in up-front Financing Costs. Tr. at 121, 177; Jiggetts Suppl. Ex. 2; Heath Ex. 1. The amount of carrying costs DEC requested is calculated at DEC's approved or applicable net of tax cost of debt. Tr. at 176. The requested amount is also premised on a Storm Recovery Bond issuance date of November 1, 2025. Tr. at 157. DEC stated that it will report to the Commission the final Carrying Cost so financed in the Issuance Advice Letter as described below.

N.C.G.S. § 62-172(a)(16) requires that DEC's Storm Recovery Costs eligible for financing be reasonable and prudent. Except for the Carrying Costs to be calculated as described herein the Storm Recovery Costs that were included in DEC's Prudency Review have been the subject of discovery and audit by the Public Staff and other interested parties to that proceeding.

The Commission's Prudency Review Order found and concluded that DEC's Storm Recovery Costs of approximately $583.53 million, including estimated carrying costs of approximately $24.65 million, were reasonable and prudent. Prudency Review Order at 30. Consistent with that Order and based upon competent, material, and substantial evidence in the whole record, the Commission finds that DEC's Storm Recovery Costs — subject to any audit and reconciliation made through the securitization process — are eligible for recovery through financing. DEC shall reflect the actual amount of Storm Recovery Costs recovered by the issuance of Storm Recovery Bonds in the Issuance Advice Letter. In addition, as provided in the Prudency Review Stipulation that was approved in the Prudency Review Order, any discrepancies between the estimates and the actual costs of the Storms will be accumulated and tracked to allow for a detailed review of the costs for reasonableness and prudency in DEC's next general rate case proceedings. Prudency Review Stip. § II.2. The discrepancies will be recorded to the general ledger as a regulatory asset or liability, and the method to either collect additional amounts or refund customers as needed will be addressed in DEC's next general rate case proceeding, as contemplated by N.C.G.S. § 62-172(a)(16)c.

The Commission further concludes, based upon competent, material, and substantial evidence, that DEC's Carrying Costs associated with the Storm Recovery Costs are reasonable and prudent. Accordingly, the Commission finds that DEC should be permitted to finance its Storm Recovery Costs, including Carrying Costs, as provided in this Financing Order.

***Up-front Financing Costs***

In the Financing Orders Petition, DEC requested that its up-front Financing Costs associated with the securitization process be included in the principal amount of storm recovery bonds in accordance with N.C.G.S. § 62-172(a)(14). Duke witness Heath testified that the up-front Financing Costs include the fees and expenses to obtain the Financing Orders, as well as the fees and expenses associated with the structuring, marketing, and pricing of the Storm Recovery Bonds, including the following: external and incremental internal legal fees, structuring advisory fees and expenses, any interest rate lock or swap fees and costs, underwriting fees and original issue discount, rating agency and trustee fees (including trustee's counsel), accounting fees, servicer's set-up costs, printing and marketing expenses, stock exchange listing fees and compliance fees, filing and registration fees, and the costs of any outside consultant and counsel retained by the Commission or the Public Staff. Tr. at 103. A complete list of all up-front Financing Costs will be included on Attachment 2 of the Issuance Advice Letter, and a form of such letter with preliminary estimates of up-front Financing Costs, is included in Appendix C of this Financing Order. Witness Heath further stated that up-front Financing Costs include reimbursement to DEC for amounts advanced for payment of such costs. *Id*. Witness Heath provided a range of estimates of the up-front Financing Costs in Heath Exhibit 1, and explained based on those figures DEC estimated the up-front Financing Costs would be $5.80 million. He stated that the estimates will be updated to actual up-front Financing Costs incurred during the proposed Issuance Advice Letter process. *Id*. at 104.

Duke witness Jiggetts explained that the actual up-front Financing Costs will not be known until after the Commission issues the Financing Orders and after the final terms of the bond issuance have been established. *Id*. at 158.

Public Staff witnesses Cofield, Meda, and Zhang testified that the Public Staff did not oppose establishing a regulatory asset for prudently incurred and properly accounted for under-recoveries of up-front Financing Costs, provided that the regulatory asset is adjusted for income taxes and accrued carrying costs at DEC's net-of-tax WACC return. Tr. at 288. However, witnesses Cofield, Meda, and Zhang proposed that any excess or overcollection of up-front Financing Costs be set aside in a regulatory liability, earning a WACC return, to be considered in DEC's next general rate case. *Id*. at 289.

In witnesses Jiggetts and Speros' rebuttal testimony, they agreed with the Public Staff's recommendation that the regulatory asset be adjusted for income taxes and accrued carrying costs at DEC's net-of-tax WACC return. Tr. at 233. However, witnesses Jiggetts and Speros testified that the Public Staff's proposal to address any overcollection of up-front Financing Costs is a less efficient and less practical method to return excess costs to customers than Duke's proposed methodology. *Id.* at 234.

The Financing Order Stipulation provides that once up-front financing costs are known, DEC shall establish a regulatory asset to defer any excess amounts of up-front Financing Costs and preserve those costs to consider for later recovery in DEC's next general rate case. Securitization Stip. § II.1. In addition, the regulatory asset shall accrue carrying costs at DEC's net-of-tax WACC return. *Id.* Any overcollection of up-front Financing Costs will be returned to customers by including such amount in the calculation of DEC's next general rate case. *Id.* § II.2.

The Commission is mindful of the fact that many of these up-front Financing Costs, such as legal fees, will not be known until after the financing is completed. Further, other up-front Financing Costs will vary depending on the size of the final issuance of the Storm Recovery Bonds. Specifically, the Securities and Exchange Commission (SEC) registration fee, underwriters' fees, and rating agency fee are proportional to the amount of qualified costs actually financed. Other up-front Financing Costs, such as original issue discount, will be determined at the time of the sale. The Commission acknowledges that the costs of any outside consultant or counsel retained by the Public Staff or the Commission are costs which are fully recoverable from Storm Recovery Bond proceeds to the extent such costs are eligible for compensation and approved for payment under the terms of such party's contractual arrangements with the Commission or the Public Staff, as the case may be. Accordingly, actual up-front Financing Costs will not be known until after the pricing of the Storm Recovery Bonds.

N.C.G.S. § 62-172(a)(6) defines Financing Costs. The Commission finds that, based upon competent, material, and substantial evidence in the whole record, DEC's proposed up-front Financing Costs fall squarely within this definition, and that these issuance costs are therefore Financing Costs eligible for recovery pursuant to the Securitization Statute. The Commission further concludes that the procedures proposed in the Financing Order Stipulation for addressing any overcollections or undercollections of the up-front Financing Costs are reasonable and appropriate.

***Ongoing Financing Costs***

In the Financing Orders Petition, DEC requested that its ongoing Financing Costs be recovered through the Storm Recovery Charges authorized by the Financing Orders. Duke witness Heath explained that ongoing Financing Costs include: servicing fees; return on invested capital; administration fees; accounting and auditing fees; regulatory fees; legal fees; rating agency surveillance fees; trustee fees (including any indemnity owed to the Trustee); independent director or manager fees; and other miscellaneous fees associated with the servicing of the Storm Recovery Bonds. Tr. at 111–12. Witness Heath provided estimates of ongoing Financing Costs in Heath Exhibit 1. Witness Heath further testified that because ongoing Financing Costs are recovered through the Storm Recovery Charge, any disparities would be resolved through the True-up Mechanism described in Duke witness Speros's testimony. *Id*. at 112.

Public Staff witnesses Cofield, Meda, and Zhang recommended two alternative methodologies for resolving any disparities between estimated and actual ongoing Financing Costs. Pursuant to the first proposed methodology, DEC would file with the Commission information regarding ongoing cost details on a monthly basis, and the Public Staff would then review the documentation. If the Public Staff took issue with the documentation, it would work with DEC to achieve an acceptable resolution. If an acceptable resolution could not be achieved, the Public Staff would then file a recommendation with the Commission and the Commission would then address the issue in DEC's next general rate case. *Id*. at 290–91. Pursuant to the second methodology, adjustments to ongoing Financing Costs would be matched with an offsetting regulatory asset or liability that would be applied to DEC's cost of service in DEC's next general rate case. *Id*. at 291.

In witnesses Jiggetts and Speros' rebuttal testimony, they testified that the Public Staff's first proposed methodology was similar to the approach proposed in the Financing Orders Petition. Witnesses Jiggetts and Speros noted two primary differences between DEC's proposal and the Public Staff's first methodology. First, the Public Staff recommended that DEC file supporting cost detail with the Commission instead of providing it to the Public Staff. *Id*. at 238–39. Second, the Public Staff's proposal did not include a delineated time period within which it was required to complete its review of DEC's filed documentation. *Id*. at 239.

In the Financing Order Stipulation the Stipulating Parties agreed to a procedure for the Public Staff to audit the ongoing Financing Costs (including auditing through possible additional data requests) for mathematical or clerical errors, or charges incurred as a result of gross negligence, recklessness, or willful misconduct by DEC or the DEC SPE, and also agreed that the Public Staff shall complete the audit within 45 days of receipt of the supporting documentation.

Having reviewed DEC's proposal, the testimony of Public Staff witnesses Cofield, Meda, and Zhang, the rebuttal testimony of witnesses Speros and Jiggetts, and the Financing Order Stipulation, the Commission determines that the proposed ongoing Financing Costs identified in DEC's Financing Orders Petition and Attachment 4 of the form of Issuance Advice Letter qualify as Financing Costs pursuant to N.C.G.S. § 62-172(a)(6) and are therefore eligible for recovery through a Storm Recovery Charge.

Because certain of the ongoing Financing Costs to be approved in the Issuance Advice Letter are estimates, and in order to ensure that the Statutory Cost Objectives are met, the Commission finds that it is just and reasonable for the Public Staff to audit the ongoing Financing Costs for mathematical or clerical errors, or charges incurred as a result of gross negligence, recklessness, or willful misconduct by either DEC or the DEC SPE, as provided in the Financing Order Stipulation.

The Public Staff shall be afforded an opportunity to review specific detailed invoices and other supporting documentation, if applicable, and narrative explanations for ongoing Financing Costs on a monthly basis, 15 days after the end of the previous month. If DEC did not receive any invoices in the previous month, DEC will submit a letter notifying the Public Staff that no invoices were received. The Public Staff shall have the opportunity to perform an audit of the ongoing Financing Costs (including auditing through additional data requests) for mathematical or clerical errors or charges incurred as a result of gross negligence, recklessness, or willful misconduct by either DEC or the DEC SPE. The Public Staff shall complete said audit within 45 days of receipt of the supporting documentation.

Upon receipt of such supporting documentation, the Public Staff shall have up to ten days to object to the supporting documentation, if such supporting documents do not rise to an adequate level of detail necessary for the Public Staff to perform this limited audit of the ongoing Financing Costs. An objection by the Public Staff shall suspend the above-described 45-day start date for the Public Staff's audit review to begin until adequate documentation is provided by DEC. The Public Staff may choose to instead audit the expenses for which the 45 day window will not be complete by the filing of DEC's true-up pursuant to the True-up Mechanism provided; however, any audit by the Public Staff shall not delay the implementation of the True-up Mechanism nor shall it have any adverse effect on the Storm Recovery Charges or Storm Recovery Bonds.

In cases where a resolution cannot be reached between the parties regarding the limited audit of the ongoing Financing Costs, the Public Staff will make a filing with the Commission at the time the dispute arises so that the matter can be resolved by the Commission in DEC's next general rate case.

Any adjustments to the Storm Recovery Charges that are necessary to correct a mathematical or clerical error shall be made in connection with the next True-up Mechanism filing after such error has been determined to have been made. The Commission will not make any adjustments to the Storm Recovery Charges for ongoing Financing Costs found to have been incurred as a result of gross negligence, recklessness, or willful misconduct by either DEC or the DEC SPE.

Rather, in the event ongoing Financing Costs are determined in a separate proceeding by the Commission to have been incurred as a result of gross negligence, reckless or willful misconduct by either DEC or the DEC SPE, DEC shall create a regulatory liability in the amount determined appropriate by the Commission to be returned to customers, with carrying costs at DEC's net-of-tax WACC, in its next general rate case. In no event shall the review of ongoing expenses result in a reduction in the Storm Recovery Charges or Storm Recovery Property or in the delay of payment to financing parties or a default under any servicing, trust or other financing document.

***Servicing and Administration Fees***

According to Duke witness Heath, servicing responsibilities will include billing, monitoring, collecting, and remitting securitization charges; reporting requirements imposed by the servicing agreement; implementing the True-up Mechanism; procedures required to coordinate required audits related to DEC's role as servicer; legal and accounting functions related to the servicing obligation; and communication with rating agencies. Tr. at 112. Administration fees cover expenses associated with administrative functions DEC will be providing to the DEC SPE, separate from those of the servicer, and include maintaining the general accounting records, preparation of quarterly and annual financial statements, arranging for annual audits of the DEC SPE's financial statements, preparing all required external financial filings, preparing any required income or other tax returns, and related support. *Id*. at 114. Witness Heath provided an estimate of the servicing and administration fees in Heath Exhibit 1.

In the proposed original form of Financing Order attached as Exhibit A to the Financing Orders Petition, DEC proposed that servicing and administration fees collected by DEC be included in its cost of service, and that DEC would credit back the fees to the customers as part of DEC's cost of service in its next general rate case, along with all of the incremental costs of performing servicing and administration functions, as well as the expenses incurred by DEC to perform obligations under the servicing agreement or Administration Agreement not otherwise recovered through the Storm Recovery Charge.

In her direct testimony, DEC witness Jiggetts explained that DEC proposed to establish regulatory asset or regulatory liability accounts for the purpose of tracking (as received and incurred) servicing and administration fees received by DEC from the DEC SPE and the incremental costs incurred by DEC in fulfilling the required functions under the servicing and administration agreements. *Id*. at 162. Witness Jiggetts further recommended that any regulatory asset or regulatory liability account established for this purpose accrue carrying costs at DEC's net-of-tax WACC, and be considered for recovery from or returned to customers in DEC's next general rate case. *Id*.

Public Staff witnesses Cofield, Meda, and Zhang testified that the servicing and administrative fees collected on behalf of Duke in excess of the actual direct and incremental costs associated with providing those services should, instead of simply being passed annually through the cost of service, be held in a regulatory liability account, separate from the regulatory assets and liabilities for other types of securitization-related costs and benefits, adjusted if appropriate for income taxes and accrued carrying costs at DEC's respective net-of-tax WACC, and refunded to ratepayers in an appropriate manner in DEC's next general rate case. *Id.* at 294. The Public Staff witnesses stated this treatment is appropriate as general rate cases do not occur every year, and sometimes several years can pass between them, and this methodology will ensure DEC recovers the actual costs it incurs to service the storm recovery bonds and to administer the SPE while providing assurance to ratepayers that the actual excess amounts collected by DEC will be passed through to customers, even if such amounts are collected from the SPEs in years between general rate cases, thus avoiding any windfalls associated with the storm securitization. The Public Staff noted that this approach did not preclude setting a normalized net revenue amount during general rate cases and then truing up over or under-recoveries in future general rate cases. *Id*. at 294–95.

Public Staff witnesses Bartolotta, Newman, and Snider testified that DEC's proposed ongoing servicing fee is consistent with fees paid to servicers in other comparable transactions, and that DEC's proposed ongoing administrative fees are reasonable based on administrative fees paid in other similar transactions, including the bonds issued pursuant to the 2021 Financing Orders. *Id*. at 345–46.

The Financing Order Stipulation provided that DEC will establish regulatory asset or regulatory liability accounts for the purpose of tracking (as received and incurred) servicing and administration fees received by DEC from the DEC SPE and the incremental costs incurred by DEC in fulfilling the required functions under the servicing and administrative agreements. Securitization Stip. § II.8. The Financing Order Stipulation further stated that any regulatory asset or liability account established pursuant to this paragraph shall accrue carrying costs at DEC's net-of-tax WACC and be considered for recovery from or returned to customers in DEC's next general rate case. *Id.* Having reviewed the testimony of the parties and the Financing Order Stipulation, the Commission finds that, based upon competent, material, and substantial evidence in the whole record, this treatment of the servicing and administration fees is just and reasonable.

***Capital Contributions***

In his direct testimony, Duke witness Heath proposed that DEC's capital contribution to the DEC SPE earn a return at the interest rate of the longest maturing tranche of the Storm Recovery Bonds. Tr. at 114.

Public Staff witnesses Cofield, Meda, and Zhang recommended that DEC should not earn a return on the contributed capital over and above what the DEC SPE actually earns on its investments and returns to DEC. *Id*. at 298.

In rebuttal testimony, Duke witnesses Jiggetts and Speros responded by explaining that DEC has a real cost of capital associated with its capital contribution and must earn a sufficient return to compensate its bondholders and shareholders for that cost equal to the interest rate of the longest maturity bond. *Id*. at 245.

The Financing Order Stipulation provides that DEC is entitled to earn a return on its capital contribution at the interest rate of the longest maturing tranche of the Storm Recovery Bonds, provided, however that such rate shall not exceed DEC's after-tax WACC approved by the Commission in Docket No. E-7, Sub 1276. Securitization Stip.§ II.10.

Having reviewed the testimony of the parties and the Financing Order Stipulation and based upon competent, material, and substantial evidence in the whole record, the Commission concludes that this return is just and reasonable to DEC and ratepayers.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 19** 

**Tail-end Collections**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the Financing Order Stipulation, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

In DEC's proposed Financing Order, attached to the Financing Orders Petition, DEC proposed that any Tail-end Collections will be tracked separately and placed into a regulatory liability account and accrue carrying costs at DEC's net-of-tax WACC, to be considered for return to customers in DEC's next general rate case.

Public Staff witnesses Cofield, Meda, and Zhang agreed with DEC's proposed treatment, noting that a regulatory liability account should be separate from other securitization-related regulatory assets and liabilities and separate from the first securitization tail-end regulatory liability account. Tr. at 296–97.

The Financing Order Stipulation provides that any Tail-end Collections will be tracked separately and placed into a regulatory liability account and accrue carrying costs at DEC's net-of-tax WACC, to be considered for return to customers in DEC's next general rate case. Securitization Stip. § II.9.

Having reviewed the testimony of the parties and the Financing Order Stipulation, and based upon competent, material, and substantial evidence in the whole record, the Commission concludes that this treatment of the Tail-end Collections is just and reasonable to DEC and ratepayers.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 20** 

**Structure of Issuance**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. This finding and these conclusions were not contested by any party.

A description of DEC's proposed transaction is contained in its Financing Orders Petition and the testimony and exhibits submitted therewith.

In brief, DEC has proposed a transaction structure that includes all of the following:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The use of one or more DEC SPEs as issuer(s) of Storm Recovery Bonds, limiting the risks to bondholders
of any adverse impact resulting from a bankruptcy proceeding of DEC or any affiliate. The number of DEC SPEs created will be dependent
on whether more than one series of Storm Recovery Bonds are issued to recover the Securitizable Balance pursuant to this Financing Order;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The DEC SPE's use of the proceeds from the issue of Storm Recovery Bonds to purchase from DEC the
Storm Recovery Property and receive collections of the Storm Recovery Charges;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· DEC's consequent use of the proceeds from that sale to the DEC SPE to finance and recover the Securitizable
Balance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The right to impose, bill, charge, collect, and receive Storm Recovery Charges that are nonbypassable
and which must be trued-up at least semiannually, but may be trued-up more frequently at the option of the servicer, to ensure the timely
payment of the debt service and ongoing Financing Costs as scheduled;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· The use of a collection account which includes, without limitation, a capital subaccount at the DEC SPE
funded initially by a deposit from DEC equal to at least 0.50 percent of the initial principal amount of the Storm Recovery Bonds issued
by the DEC SPE;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· A servicer, initially DEC, responsible for billing and collecting the Storm Recovery Charge from existing
and future retail customers; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· Federal income tax consequences complying with the provisions established in the IRS Revenue Procedure.

More specifically, DEC proposed that the DEC SPE will be created and then DEC will transfer the rights to impose, bill, charge, collect, and receive Storm Recovery Charges and to obtain true-up adjustments along with the other rights arising pursuant to this Financing Order. Upon such transfer and simultaneously with the issuance of Storm Recovery Bonds, these transferred rights will become Storm Recovery Property as provided by the Securitization Statute. Joint Pet. at 13.

DEC proposed that the DEC SPE will issue Storm Recovery Bonds and will transfer the net proceeds from the sale of such bonds to DEC in consideration for the transfer of the Storm Recovery Property. The DEC SPE will be organized and managed in a manner designed to maintain the DEC SPE as a bankruptcy-remote entity and thus unaffected by the bankruptcy of DEC or any other affiliate of DEC or any of their respective successors. Tr. at 69. DEC has proposed that the Storm Recovery Bonds be issued pursuant to an indenture and administered by an indenture trustee. The Storm Recovery Bonds will be secured by and payable solely from the Storm Recovery Property created pursuant to this Financing Order. Heath Ex. 2c. The Storm Recovery Property and other collateral will be pledged to the indenture trustee for the benefit of the holders of the Storm Recovery Bonds and to secure payment of principal, interest on the Storm Recovery Bonds, and ongoing Financing Costs. Heath Ex. 2a.

DEC proposed that the servicer of the Storm Recovery Bonds collect the Storm Recovery Charges and remit those amounts to the indenture trustee on behalf of the DEC SPE. Tr. at 136. The servicer will be responsible for making any required or allowed true-ups of the Storm Recovery Charges. Tr. at 216. If the servicer defaults on its obligations under the servicing agreement, the indenture trustee, acting for the benefit of holders of Storm Recovery Bonds, may appoint a successor servicer. Heath Ex. 2b at 28. DEC also proposed to act as the initial servicer for the Storm Recovery Bonds. Tr. at 112.

Under DEC's proposal, the Storm Recovery Charges will be calculated to ensure the collection of an amount sufficient to pay the debt service due on the Storm Recovery Bonds together with the ongoing Financing Costs, which include the servicing fee, administration fees for the DEC SPE, rating agencies' fees, trustee fees and expenses, legal and accounting fees, other ongoing fees and expenses and the cost of replenishing the capital subaccount (or overcollateralization subaccount, if required). Tr. at 40. These ongoing Financing Costs are Financing Costs eligible for recovery pursuant to the Securitization Statute and are addressed further in this Financing Order, in connection with Findings of Fact Nos. 15–18.

DEC has proposed that the Storm Recovery Charges will be calculated and adjusted pursuant to the formula-based method, the True-up Mechanism, described in witness Speros's testimony and included as Appendix B to this Financing Order. DEC has requested approval of Storm Recovery Charges sufficient to recover the principal and interest on the Storm Recovery Bonds plus ongoing Financing Costs. DEC proposed that the Storm Recovery Charges be adjusted at least semiannually until 12 months prior to the scheduled payment date of the latest maturing tranche of a series of Storm Recovery Bonds, at which point the Storm Recovery Charges shall be adjusted at least quarterly, to ensure that the amount collected from Storm Recovery Charges is sufficient to pay the debt service on the Storm Recovery Bonds and all ongoing Financing Costs. Tr. at 70.

Duke witness Cimino testified that DEC's proposed bond structure is designed to provide relatively level annual debt service and revenue requirements over the life of the bond issue and would result in declining Storm Recovery Charges over time, assuming growth in customer energy consumption, other factors being equal. Tr. at 51.

The Commission concludes that DEC's proposed transaction structure is reasonable and in compliance with the Securitization Statute. Moreover, portions of DEC's proposed transaction structure, described in this Financing Order, are necessary to enable the Storm Recovery Bonds to obtain the highest bond credit rating possible, with an objective of AAA credit ratings (or the equivalent highest credit ratings given), to further ensure that the proposed issuance of the Storm Recovery Bonds on behalf of DEC, and the imposition of the Storm Recovery Charges will meet the Statutory Cost Objectives. Accordingly, based upon competent, material, and substantial evidence in the whole record, DEC's issuance structure is hereby approved.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 21** 

**Structure of Issuance**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

***Special Purpose Entities***

Under DEC's financing structure, DEC will create one or more DEC SPEs, each as a bankruptcy-remote Delaware LLC with DEC as its sole member, as set forth in the limited liability company agreement discussed further below. The DEC SPE will be formed for the limited purpose of acquiring Storm Recovery Property from DEC, issuing Storm Recovery Bonds (which may be issued in one or more tranches), and performing other activities relating thereto or otherwise authorized by the limited liability company agreement. The rights, obligations, structure, and restrictions described in this Financing Order with respect to the DEC SPE are applicable to each such purchaser of Storm Recovery Property to the extent of the Storm Recovery Property acquired by it and the Storm Recovery Bonds issued by it.

DEC proposed the following: (1) that the DEC SPE may issue Storm Recovery Bonds in an aggregate amount not to exceed the Securitizable Balance approved by this Financing Order; and (2) to pledge to an indenture trustee, as collateral for payment of the Storm Recovery Bonds, the Storm Recovery Property, including the DEC SPE's right to receive the Storm Recovery Charges as and when collected, and other collateral described in the indenture. Tr. at 337. The DEC SPE will not be permitted to engage in any other activities and will have no assets other than the Storm Recovery Property and related assets to support its obligations under the Storm Recovery Bonds. *Id.* at 337–38. Duke witness Cimino explained that these restrictions on the activities of the DEC SPE and restrictions on the ability of DEC to take action on the DEC SPE's behalf are imposed to achieve the objective that the DEC SPE will be bankruptcy-remote and will not be affected by a bankruptcy of DEC or any affiliate or successor of DEC. Tr. at 34.

DEC proposed that the DEC SPE will be managed by a board of managers with rights and duties set forth in its organizational documents. As long as the Storm Recovery Bonds remain outstanding, the DEC SPE will have at least one independent manager with no organizational affiliation with DEC other than possibly acting as independent manager(s) for another bankruptcy-remote subsidiary of DEC or its affiliates. The DEC SPE will not be permitted to amend the provisions of its limited liability company agreement or other organizational documents that relate to bankruptcy-remoteness of the DEC SPE without the consent of the independent manager(s). Similarly, the DEC SPE will not be permitted to institute bankruptcy or insolvency proceedings or to consent to the institution of bankruptcy or insolvency proceedings against it, or to dissolve, liquidate, consolidate, convert, or merge without the consent of the independent manager(s). Other restrictions to facilitate bankruptcy-remoteness may also be included in the organizational documents of the DEC SPE as required by the rating agencies. The Commission agrees that these restrictions to ensure that the DEC SPE is bankruptcy-remote are reasonable.

The DEC SPE will have no staff to perform administrative services, such as routine corporate maintenance, reporting, and accounting functions. DEC proposed that these services will be provided by DEC pursuant to the terms of the administration agreement between the DEC SPE and DEC.

Per rating agency and IRS requirements, DEC will transfer to the DEC SPE an amount required to capitalize the DEC SPE adequately (DEC SPE Capitalization Level) for deposit into the capital subaccount. The DEC SPE Capitalization Level is expected to be 0.50 percent of the initial principal amount of the Storm Recovery Bonds to be issued by the DEC SPE or such greater amount as might be needed to meet IRS or rating agency requirements. Tr. at 46–47. The actual DEC SPE Capitalization Level will depend on tax and rating agency requirements. Moreover, the Commission confirms that the DEC SPE will be an "assignee" as defined in N.C.G.S. § 62-172(a)(2), when ownership of the Storm Recovery Property is transferred to such DEC SPE, and such DEC SPE may issue Storm Recovery Bonds in accordance with this Financing Order as discussed further herein.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 22–23** 

**Structure of Issuance**

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. These findings and conclusions were not contested by any party.

***Storm Recovery Property***

The Commission determines, consistent with N.C.G.S. § 62-172(a)(17), that Storm Recovery Property consists of the following: (1) all rights and interests of DEC or any successor or assignee of DEC under this Financing Order, including the right to impose, bill, charge, collect, and receive Storm Recovery Charges authorized in this Financing Order and to obtain true-up adjustments to such Storm Recovery Charges as provided in this Financing Order, and (2) all revenues, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in this Financing Order, regardless of whether such revenues, collections, claims, rights to payment, payments, money, or proceeds are imposed, billed, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money, or proceeds.

As DEC has requested pursuant to N.C.G.S. § 62-172(b)(3)c, the Commission determines that it is reasonable and appropriate that the creation of the Storm Recovery Property be conditioned upon, and simultaneous with, the sale of such Storm Recovery Property to the DEC SPE and the pledge of such Storm Recovery Property to secure the Storm Recovery Bonds.

The Storm Recovery Property shall constitute an existing, present intangible property right or interest therein, notwithstanding that the imposition and collection of Storm Recovery Charges depends on DEC performing its servicing functions relating to the collection of Storm Recovery Charges and on future electricity consumption. Such property shall exist regardless of whether or not the revenues or proceeds arising from the property have been billed, have accrued, or have been collected and notwithstanding the fact that the value or amount of the property is dependent on the future provision of service to retail customers by DEC or its successors or assignees and future consumption of electricity by retail customers. Furthermore, the Storm Recovery Property shall continue to exist until the Storm Recovery Bonds are paid in full and all Financing Costs and other costs of the Storm Recovery Bonds have been recovered in full.

The Storm Recovery Property also constitutes a present property right for purposes of contracts concerning the sale or pledge of property. The interest of a transferee, purchaser, acquirer, assignee, or pledgee in the Storm Recovery Property, and in the revenue and collections arising from that property, is not subject to set off, counterclaim, surcharge, or defense by DEC or any other person or in connection with the reorganization, bankruptcy, or other insolvency of DEC or any other entity. *See* N.C.G.S. § 62-172(e)(1).

The creation, attachment, granting, perfection, priority and enforcement of liens and security interests in Storm Recovery Property are governed by N.C.G.S. § 62-172(e)(2).

Pursuant to N.C.G.S. § 62-172(e)(2)e, the priority of a security interest in Storm Recovery Property is not affected by the commingling of Storm Recovery Charges with other amounts. Any pledgee or secured party shall have a perfected security interest in the amount of all Storm Recovery Charges that are deposited in the collection account or any other cash or deposit account of DEC in which Storm Recovery Charges have been commingled with other funds and any other security interest that may apply to those funds shall be terminated when such funds are transferred to the collection account.

When DEC transfers Storm Recovery Property to the DEC SPE pursuant to this Financing Order under an agreement that expressly states that the transfer is a sale or other absolute transfer in accordance with the "absolute transfer" provisions of N.C.G.S. § 62-172(e)(3), that transfer shall constitute an absolute transfer and true sale and not a pledge of or secured transaction or other financing arrangement, and title (both legal and equitable) to the Storm Recovery Property shall immediately pass to the DEC SPE. After such a transfer, the Storm Recovery Property shall not be subject to any claims of DEC or its creditors, other than creditors holding a properly perfected prior security interest in the Storm Recovery Property perfected by N.C.G.S. § 62-172(e).

As provided by N.C.G.S. § 62-172(e)(3)b, the characterization of the sale, conveyance, assignment, or transfer of Storm Recovery Property as an absolute transfer and true sale or other absolute transfer and the corresponding characterization of the transferee's property interest shall not be affected by any of the following: (1) commingling of Storm Recovery Charges arising with respect to the Storm Recovery Property with other amounts; (2) the retention by DEC of a (i) partial or residual interest, including an equity interest, in the Storm Recovery Property, whether direct or indirect, or whether subordinate or otherwise or (ii) the right to recover costs associated with taxes, franchise fees or license fees imposed on the collection of Storm Recovery Charges; (3) any recourse that the transferee may have against DEC other than any such recourse created, contingent upon, or otherwise occurring or resulting from one or more of DEC's retail customers' inability to timely pay all or a portion of the Storm Recovery Charge; (4) any indemnification rights, obligations, or repurchase rights made or provided by DEC, other than indemnity or repurchase rights based solely upon DEC's retail customers' inability or failure to timely pay all or a portion of the Storm Recovery Charge; (5) the obligation of DEC to collect Storm Recovery Charges on behalf of the DEC SPE; (6) DEC acting as the servicer of the Storm Recovery Charges or the existence of any contract that authorizes or requires DEC, to the extent that any interest in Storm Recovery Property is sold or assigned, to contract with the assignee or any financing party that it will continue to operate its system to provide service to its customers for the benefit and account of such assignee or financing party, and will account for and remit such amounts to or for the account of such assignee or financing party; (7) the treatment of the sale, conveyance, assignment, or other transfer for tax, financial reporting, or other purposes; (8) granting or providing to holders of the Storm Recovery Bonds a preferred right to the Storm Recovery Property or credit enhancement by DEC or its affiliates with respect to the Storm Recovery Bonds; or (9) any application of the True-up Mechanism.

Based upon competent, material, and substantial evidence in the whole record, the Commission finds that the terms and conditions discussed above regarding Storm Recovery Property are reasonable and adhere to the requirements of the Securitization Statute. In addition, the Storm Recovery Property and all other collateral is to be held and administered by an indenture trustee pursuant to the indenture, which helps ensure lower Storm Recovery Charges and that the Statutory Cost Objectives can be achieved. Accordingly, the Commission approves the: (1) creation of Storm Recovery Property, including the rights to impose, bill, charge, collect, and receive Storm Recovery Charges and obtain periodic adjustments to the Storm Recovery Charges, and (2) DEC's sale of the Storm Recovery Property to the DEC SPE.

As provided in N.C.G.S. § 62-172(e)(1)d, if DEC defaults on any required remittance of amounts collected in respect to Storm Recovery Property specified in this Financing Order, the Superior Court in Wake County, upon application by an interested party, and without limiting any other remedies available to the applying party, shall order the sequestration and payment of the revenues arising from such Storm Recovery Property to the financing parties or their assignees. This Financing Order shall remain in full force and effect notwithstanding any reorganization, bankruptcy, or other insolvency proceedings with respect to DEC or its successors or assignees.

Finally, the Commission concludes that the method of tracing funds collected as Storm Recovery Charges, or other proceeds of Storm Recovery Property, and determining the identifiable cash proceeds of any Storm Recovery Property as set forth in the servicing agreement and substantially similar to the servicing agreement in the 2021 NC Transactions, the final version of which shall be filed with the Commission concurrent with DEC's filing with the SEC, is reasonable and is therefore approved.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 24–25** 

**Structure of Issuance**

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

***Form of Transaction Documents***

DEC submitted for approval the Transaction Documents necessary for the issuance of the Storm Recovery Bonds. Tr. at 84.

The purchase and sale agreement and administration agreement are between DEC and the DEC SPE. These contracts set out in substantial detail certain terms and conditions relating to the transaction structure for each issuance of Storm Recovery Bonds, including the proposed sale of Storm Recovery Property to the DEC SPE, the administration of the DEC SPE, and the servicing of the Storm Recovery Charges and Storm Recovery Bonds. Tr. at 38, Heath Exhibits 2a and 2d.

The limited liability company agreement constitutes the organizing document of the DEC SPE, with DEC as the sole member. DEC anticipates that the limited liability company agreement would be executed substantially in the form submitted to the Commission, subject to such changes deemed necessary or advisable to satisfy bankruptcy opinion and rating agency considerations.

DEC has also submitted a form of indenture between the DEC SPE and an indenture trustee, which sets forth proposed security and terms for the Storm Recovery Bonds. Tr. at 46.

In addition, DEC proposed to execute a servicing agreement with the DEC SPE, the form of which has also been submitted to the Commission. DEC will be the initial servicer but may be succeeded as servicer as detailed in the servicing agreement. Pursuant to the servicing agreement, the servicer is required, among other things, to: (1) impose, bill, charge, collect, and receive the Storm Recovery Charges for the benefit and account of the DEC SPE; (2) perform periodic true-up adjustments of Storm Recovery Charges as required or allowed by this Financing Order; and (3) account for and remit its collection of Storm Recovery Charges to or for the account of the DEC SPE in accordance with the remittance procedures contained in the servicing agreement. The servicer will perform these duties without any charge, deduction, or surcharge of any kind, other than the servicing fee specified in the servicing agreement. In the servicing agreement, DEC commits to maintaining accurate and complete accounts of the Storm Recovery Property. Heath Ex. 2b. Further, DEC, as the servicer, will maintain custodial bank accounts and bank clearing accounts, and must remit collections within two business days. *Id*.

Under the servicing agreement, if any servicer fails to fully perform its servicing obligations, the indenture trustee or its designee may, and upon the instruction of the requisite percentage of holders of the outstanding bonds shall, appoint an alternate party to replace the defaulting servicer. The obligations of the servicer under the servicing agreement, the circumstances under which an alternate servicer may be appointed, and the conditions precedent for any amendment of such agreement will be more fully specified in the servicing agreement, which is substantially similar to the servicing agreement in the 2021 NC Transactions. The rights of the DEC SPE under its servicing agreement will be included in the collateral pledged to the indenture trustee under its indenture for the benefit of holders of the Storm Recovery Bonds, should such bonds be issued.

Duke witness Heath explained that DEC's proposed Transaction Documents are similar to those used in the 2021 NC Transactions, with the primary exception being DEC's decision to no longer recommend the series trust structure due to developments in the utility securitization market. Tr. at 118, 464.

Based upon competent, material, and substantial evidence in the whole record, the Commission hereby concludes that the Transaction Documents described above are necessary to facilitate the proposed financing structure approved herein. Moreover, the Transaction Documents are deemed reasonable and will help achieve the Statutory Cost Objectives. Accordingly, the Commission approves the form Transaction Documents, subject to further review and input from the Bond Advisory Team, as provided in Finding of Fact No. 25, to ensure compliance with this Financing Order and the achievement of the Statutory Cost Objectives.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 26** 

**Structure of Issuance**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

***Offering and Sale of Bonds***

In its Financing Orders Petition, DEC requested the flexibility to determine a final transaction structure that is best tailored to then-existing rating agency considerations, market conditions, and investor preferences, so that the financing of the Storm Recovery Costs can achieve the Statutory Cost Objectives. Financing Orders Pet. at 24. DEC also proposed to maintain flexibility to issue the storm recovery bonds in either a registered public offering or unregistered exempt offering, in order to best achieve the Statutory Cost Objectives. *Id.* at 22.

Duke witness Cimino explained that the final proposed schedule for offering the DEC and DEP storm recovery bonds will be a function of market conditions at the time such bonds are brought to market and decisions about marketing the two transactions will be made such that each transaction individually satisfies the Statutory Cost Objectives. Tr. at 61.

DEC has proposed that the Storm Recovery Bonds be offered pursuant to an SEC-registered offering as was done in the 2021 NC Transactions. Tr. at 53. That said, DEC requested the Commission leave open the option for it to use a non-SEC registered offering if, for some unanticipated reason, a non-SEC registered offering would achieve the Statutory Cost Objectives. *Id*. at 371–72.

DEC has proposed that the Storm Recovery Bonds be sold pursuant to a sale through one or more underwriters in a negotiated offering as described in the testimony of witness Cimino. *Id.* at 54. DEC, with the input of the Bond Advisory Team, will select the lead managing underwriter(s) to achieve its Statutory Cost Objectives. *Id.* at 95–96. DEC's primary plan is to pursue a negotiated sales process for issuance of the bonds, as virtually all utility securitizations have been sold in that manner and as was done in the 2021 NC Transactions. *Id*. at 97, 102.

The Commission concludes that the issuance of the Storm Recovery Bonds through an SEC-registered negotiated sale is likely to result in lower overall costs and satisfy the Statutory Cost Objectives and should therefore be approved. However, DEC is also authorized to pursue other sale options, including a Rule 144A offering, to ensure the Statutory Cost Objectives are met. The Commission therefore finds it necessary to grant DEC flexibility and authority, in consultation with the Bond Advisory Team, to pursue other sale options that result in the achievement of the Statutory Cost Objectives for customers consistent with market conditions at the time the Storm Recovery Bonds are priced.

As also described by Duke witness Cimino, Duke has committed to consider the potential costs and benefits associated with each proposed transaction structure and issuance strategy to determine the strategies that best enable DEC to achieve the Statutory Cost Objectives. *Id.* at 74. The Commission agrees with DEC that the most advantageous marketing plan and structure to best achieve the Statutory Cost Objectives will be based on certain variables and market conditions not yet known. The Commission believes such flexibility will best ensure the Statutory Cost Objectives are achieved. By allowing DEC flexibility to determine which of the above issuance structures are best tailored to then existing rating agency considerations, market conditions, and investor preferences, the financing of Storm Recovery Costs can be reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced.

Accordingly, based upon competent, material, and substantial evidence in the whole record, the Commission concludes that it is in the best interest of ratepayers for DEC to be granted the flexibility to determine which proposed issuance structure would best achieve the Statutory Cost Objectives. Duke shall consider the potential costs and benefits associated with each proposed transaction structure and issuance strategy to determine the strategies that best enable DEC to achieve the Statutory Cost Objectives. DEC's SPE shall have no obligations with respect to the storm recovery bonds sponsored by DEC. Storm Recovery Charges paid by DEC customers shall not defray DEC's Storm Costs, Up-front Financing Costs, or ongoing Financing Costs, except as may be authorized by the Commission in connection with a future combination or merger.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 27–29** 

**Structure of Issuance**

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

***Amortization, Interest Rates, and Credit Ratings of Storm Recovery Bonds***

In the Financing Orders Petition, DEC proposed a 20-year bond period for the Storm Recovery Charges. Duke witness Heath testified that the 20-year proposal is consistent with the prior 2021 NC Transactions.

DEC also proposed that the first payment of principal and interest for the Storm Recovery Bonds shall occur within 12 months of issuance. Payments of principal and interest thereafter shall be no less frequent than semiannually. Annual payments of principal of and interest on the Storm Recovery Bonds shall be substantially level over the expected term of the Storm Recovery Bonds. DEC shall decide the exact scheduled final payment dates and legal final maturities of each tranche to ensure the issuance of Storm Recovery Bonds meets the Statutory Cost Objectives.

The Commission concludes that this proposed structure, which provides substantially level annual debt service and revenue requirements over the life of the Storm Recovery Bonds, is in the public interest and should be utilized.

As to interest rates, Duke witness Cimino recommended issuing the Storm Recovery Bonds as fixed-rate bonds. Tr. at 53–54. He explained that fixed rates result in predictable revenue requirements, which facilitates the true-up process. *Id*. If floating rate bonds were issued, it would be necessary to enter into interest rate swaps in order to create a fixed rate payment obligation, and the swap arrangement would increase risks for ratepayers. *Id*. at 54. The Commission concludes that each tranche of the Storm Recovery Bonds should carry a fixed interest rate, reflecting current market conditions. Should market conditions change, and it becomes necessary for one or more tranches of bonds to be issued as floating-rate securities to achieve the Statutory Cost Objectives, DEC is authorized to issue such bonds but will be required to execute agreements to swap the floating-rate payments to fixed-rate payments. As noted in Findings of Fact Nos. 44–45, a decision to issue floating rate bonds must be subject to input and advice from the Bond Advisory Team, and DEC and the lead underwriters must each certify that the floating rate issuances resulted in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order. In making this certification, the costs of any interest rate swap agreements shall be included as part of the total cost of the proposed issuance. This flexibility will ensure that DEC can achieve economic benefits for customers.

DEC anticipates that the Storm Recovery Bonds will achieve a AAA rating (or the equivalent highest credit ratings given) from at least two nationally recognized rating agencies. The Commission hereby grants DEC authority to agree to necessary credit enhancements, with recovery of related costs as ongoing Financing Costs, to achieve the Statutory Cost Objectives.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 30** 

**Structure of Issuance**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. This finding and the conclusions were not contested by any party.

***Security for Storm Recovery Bonds***

DEC proposed that the DEC SPE will establish a collection account as a trust account, to be held by its indenture trustee as collateral to ensure that the scheduled payment of principal, interest and other costs associated with the Storm Recovery Bonds are paid in full and on a timely basis. Tr. at 348. Each collection account will include the general subaccount, the capital subaccount, the excess funds subaccount, and the tail-end collection subaccount, and may include other subaccounts if required to obtain AAA ratings (or the equivalent highest credit ratings given) on the Storm Recovery Bonds to achieve the Statutory Cost Objectives.

DEC proposed that the servicer deposit Storm Recovery Charge remittances for the Storm Recovery Bonds into the general subaccount for the DEC SPE. On a periodic basis, the money in the general subaccount will be allocated to pay expenses of the DEC SPE, to pay principal of and interest on the Storm Recovery Bonds, and to meet the funding requirements of the other subaccounts, according to specified payment priority established in the indenture. Funds in the general subaccount will be invested by the indenture trustee in short-term, high-quality investments, and such funds (including, to the extent necessary, investment earnings) will be applied by the indenture trustee to pay principal of and interest on the Storm Recovery Bonds as well as all other components of the ongoing Financing Costs payable by the DEC SPE.

When the Storm Recovery Bonds are issued, DEC proposed to make a capital contribution to the DEC SPE, which the DEC SPE will deposit into its capital subaccount. The capital subaccount serves as collateral for timely payment of principal and interest on the Storm Recovery Bonds and is a credit enhancement. *Id*. at 113. The Storm Recovery Bond proceeds will not be used to fund this capital contribution. The amount of the capital contribution will be at least 0.50 percent of the original principal amount of the Storm Recovery Bonds issued by the DEC SPE. If funds from a capital subaccount must be drawn upon to cover shortfalls in the Storm Recovery Charge collections, the subaccount will be replenished to its original level through the true-up process described below. The funds in the capital subaccount will be invested in short-term, high-quality investments and, if necessary, such funds (including investment earnings) will be used by the indenture trustee to pay principal of and interest on the Storm Recovery Bonds and the ongoing Financing Costs payable by the DEC SPE. It is just and reasonable for DEC to earn a rate of return on its invested capital in the DEC SPE equal to the rate of interest payable on the longest maturing tranche of Storm Recovery Bonds to the extent it does not exceed the after-tax WACCs approved by the Commission in Docket No. E-7, Sub 1276 and this return on invested capital should be a component of the Periodic Payment Requirement (as defined below), and accordingly, recovered from Storm Recovery Charges.

DEC proposed that any excess funds subaccount will hold any Storm Recovery Charge collections and investment earnings on the collection account in excess of the amounts needed to pay current principal of and interest on the Storm Recovery Bonds and to pay all of the ongoing Financing Costs payable by the DEC SPE including, but not limited to, funding or replenishing the capital subaccount. Any balance in or amounts allocated to such excess funds subaccount on a true-up adjustment date will be subtracted from any amounts required for such period for purposes of the true-up adjustment. The funds in the excess funds subaccount will be invested in short-term, high-quality investments, and such funds (including investment earnings thereon) will be available to pay principal of and interest on the Storm Recovery Bonds and the ongoing Financing Costs payable by the DEC SPE.

DEC also proposed that any collection account and the subaccounts described above are intended to facilitate the full and timely payment of scheduled principal of and interest on the Storm Recovery Bonds and all other authorized components of the on-going Financing Costs payable by the DEC SPE. If the amount of Storm Recovery Charge collections in the general subaccount is insufficient to make, on a timely basis, all scheduled payments of principal of and interest on the Storm Recovery Bonds and to make payment on all of the other components of the ongoing Financing Costs payable by the DEC SPE, the relevant excess funds subaccount and the relevant capital subaccount will be drawn down, in that order, to make such payments. Any deficiency in a capital subaccount due to such withdrawals must be replenished on a periodic basis through the true-up process.

DEC also proposed that any tail-end collection subaccount will hold any Storm Recovery Charges that were collected after the final payment and satisfaction of the Storm Recovery Bonds and after the discharge of all obligations with respect to such bonds. In accordance with Financing Order Stipulation, the amount in the tail-end collection subaccount will be recorded as a separate regulatory liability, accrue carrying costs at DEC's net-of-tax WACC and credited back to customers in DEC's next rate case.

In addition to the foregoing, there may be such additional accounts and subaccounts as are necessary to segregate amounts received from various sources, or to be used for specified purposes. Upon the maturity of the Storm Recovery Bonds and upon the discharge of all obligations with respect to such bonds, amounts remaining in each collection account, as well as later collections of Storm Recovery Charges, will be released. As noted in this Financing Order, equivalent amounts, less the amount of any capital subaccount, will be recorded as a regulatory liability, accrue carrying costs at DEC's net-of-tax WACC, and be credited back to customers in DEC's next general rate case following the maturity of the Storm Recovery Bonds.

Based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that utilizing a collection account, including a general subaccount, a capital subaccount, an excess funds subaccount, and a tail-end collection subaccount, as proposed by DEC, is reasonable and should help achieve the Statutory Cost Objectives. Moreover, the Commission grants DEC the flexibility and authority to include other subaccounts in the collection account where required to obtain AAA ratings or equivalent on the Storm Recovery Bonds, which will in turn lower Storm Recovery Charges for customers.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 31–32** 

**Structure of Issuance**

The evidence supporting these findings of fact is contained in the Financing Order Stipulation, Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. These findings and conclusions were not contested by any party.

***DEC as Initial Servicer of the Storm Recovery Bonds***

DEC proposed to execute a servicing agreement with the DEC SPE, with the final version to be filed with the Commission concurrent with its filing with the SEC that is substantially similar to the servicing agreements in the 2021 NC Transactions.

Under the servicing agreement, the servicer shall be required, among other things, to impose, bill, charge, collect, and receive the Storm Recovery Charges for the benefit of the DEC SPE, to make the true-up adjustments of Storm Recovery Charges required or allowed by this Financing Order, and to account for and remit the Storm Recovery Charges to or for the account of the DEC SPE in accordance with the remittance procedures contained in the servicing agreement without any charge, deduction, or surcharge of any kind, other than the servicing fee specified in the servicing agreement. The appropriate servicing fee shall be as set forth in this Financing Order.

To preserve the integrity of the bankruptcy-remote structure of the DEC SPE and ensure the high credit quality of the Storm Recovery Bonds, the servicer must be adequately compensated for the services it provides, including the calculation, billing, and collection of Storm Recovery Charges; remittance of those charges to the indenture trustee; and the preparation, filing, and processing of the True-up Adjustment Letter. DEC's proposed form of servicing agreement provides for an ongoing servicing fee for the initial servicer in the amount of 0.05 percent of the initial principal amount of the Storm Recovery Bonds, plus out-of-pocket expenses. DEC provided testimony regarding the anticipated costs of performing its servicing functions under the servicing agreement, *see* Heath Ex. 1, which the Commission finds to be reasonable and appropriate.

In addition to the annual ongoing servicing fee, DEC proposed to recover its expenses as an up-front financing cost, in order to recover set-up costs of the servicer to set up necessary servicing functions. The evidence shows that these amounts represent a prudently incurred cost to DEC, and the Commission finds that those costs are reasonable.

In accordance with the Financing Order Stipulation, the servicing fees collected by DEC, or any affiliate acting as the servicer under the servicing agreement, will be held separately in a regulatory asset or regulatory liability account for the purpose of tracking (as received and incurred) servicing fees received by DEC from the DEC SPE and incremental costs incurred by DEC in fulfilling the required functions under the servicing agreement. The regulatory asset or regulatory liability account established pursuant to this paragraph shall accrue carrying costs at DEC's net-of-tax WACC and any amounts in excess of DEC's incremental costs of servicing the Storm Recovery Bonds shall be returned to DEC's retail customers in DEC's next rate case. Any expenses incurred by DEC or such affiliate to perform obligations under the servicing agreement, which are not recovered through the Storm Recovery Charges, will be included in DEC's cost of service.

DEC has proposed that it will not be allowed to voluntarily resign from its duties as a servicer if such resignation would harm the credit rating on Storm Recovery Bonds issued by DEC SPE. Even if DEC's resignation as servicer would not harm the credit rating on the Storm Recovery Bonds issued by the DEC SPE, the Commission finds and directs that DEC shall not be permitted to voluntarily resign from its duties as servicer, without consent of the Commission. If DEC defaults on its duties as servicer or is required for any reason to discontinue those functions, then DEC proposed that a successor servicer acceptable to the indenture trustee be named to replace DEC as servicer so long as such replacement would not cause any of the then current credit ratings of the Storm Recovery Bonds to be suspended, withdrawn or downgraded. The Commission holds that any successor servicer to DEC also must be acceptable to the Commission.

DEC has proposed, and the Commission finds and directs that, the servicing fee payable to a substitute servicer should not exceed 0.60 percent per annum on the initial principal balance of the Storm Recovery Bonds issued by the DEC SPE, unless a higher fee is approved by the Commission. *Id*. at 113.

DEC shall provide a credit to its retail customers to the extent retail customers incur losses associated with higher servicing fees payable to a substitute servicer as a result of DEC's negligence, recklessness, or willful misconduct in acting as a servicer, provided, however, that any credit to its retail customers shall not impact the Storm Recovery Charges or the Storm Recovery Property. This provision shall be reflected in the Transaction Documents for these Storm Recovery Bonds.

The Commission finds and directs that the DEC SPE and the indenture trustee shall not be permitted to waive any material obligations of DEC as transferor or as servicer of Storm Recovery Property without express written consent of the Commission.

Furthermore, it is contemplated that DEC shall act as the servicer for the Storm Recovery Bonds until the Storm Recovery Bonds are fully amortized. If the State of North Carolina or the Commission decides to allow billing, collection, and remittance of the Storm Recovery Charges by a third party supplier within the DEC service territory, such authorization must be consistent with the rating agencies' requirements necessary for the Storm Recovery Bonds to maintain the targeted AAA rating, as outlined in the testimony of witness Cimino. *Id*. at 54.

Based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that it is reasonable for DEC to act as initial servicer under the proposed financing transaction, which will reduce risk associated with the proposed securitization, therefore resulting in lower Storm Recovery Charges and greater benefits to ratepayers. Accordingly, the Commission requires DEC to act as initial servicer pursuant to the servicing agreement under the proposed financing structure.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 33–34** 

**Structure of Issuance**

The evidence supporting these findings of fact is contained in the Financing Order Stipulation, the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. These findings and conclusions were not contested by any party.

***DEC as Administrator of the DEC SPE***

Under the proposed administration agreement, DEC will perform the administrative duties necessary to maintain the DEC SPE. The appropriate administration fee shall be as set forth in this Financing Order.

DEC's proposed form of administration agreement provides for a $50,000 annual fee plus out-of-pocket expenses paid to an administrator for performing the services required by the administration agreement. Witness Heath discusses these anticipated costs in his testimony. The Commission finds that DEC has demonstrated that this annual fee is necessary to cover any costs to be incurred by DEC in performing services as administrator.

Based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that it is reasonable for DEC to act as an administrator of the DEC SPE under the proposed financing transaction. Accordingly, the Commission requires DEC to act as administrator pursuant to the administration agreement under the proposed financing structure.

In accordance with the Financing Order Stipulation, the administration fees collected by DEC or any affiliate acting as the administrator under the administration agreement will be held separately in a regulatory asset or regulatory liability account for the purpose of tracking (as received and incurred) administration fees received by DEC from the DEC SPE and incremental costs incurred by DEC in fulfilling the required functions under the administration agreement. The regulatory asset or regulatory liability account established pursuant to this paragraph shall accrue carrying costs at DEC's net-of-tax WACC and any amounts in excess of DEC's incremental costs of administering the DEC SPE shall be returned to DEC's retail customers in its next general rate case. The expenses incurred by DEC or such affiliate to perform obligations under the administration agreement not otherwise recovered through the Storm Recovery Charges will likewise be included in DEC's cost of service.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 35** 

**Structure of Issuance**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. This finding and these conclusions were not contested by any party.

***Storm Recovery Bonds to be Treated as Debt for Federal Income Tax Purposes***

Duke witness Heath explained that DEC would not realize taxable income from receipt of cash in exchange for the issuance of the Storm Recovery Bonds, provided the transaction is structured in accordance with IRS safe harbor rules described in the IRS Revenue Procedure. Tr. at 117. Therefore, based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that it is just and reasonable for DEC to structure the Storm Recovery Bond transactions in a way that meets all requirements for the IRS safe harbor treatment, including that, for federal income tax purposes, the Storm Recovery Bonds be treated as debt of DEC.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 36–39** 

Storm Recovery Charges

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. This finding and these conclusions were not contested by any party.

***Imposition and Computation of Storm Recovery Charges***

DEC sought authorization to collect from its customers, in the manner provided in this Financing Order and/or the Tariffs approved hereby, Storm Recovery Charges in an amount sufficient to provide for the timely payment of principal of and interest on the Storm Recovery Bonds and all other ongoing Financing Costs as described in the Evidence and Conclusions for Findings of Fact Nos. 40–42.

To repay the Storm Recovery Bonds and ongoing Financing Costs, DEC is hereby authorized to implement Storm Recovery Charges to be collected on a per-kWh basis from all applicable customer rate classes until the Storm Recovery Bonds and associated Financing Costs are paid in full. The Storm Recovery Charges are nonbypassable and must be paid by all existing or future retail customers receiving transmission or distribution services from DEC or its successors or assignees under Commission-approved rate schedules or under special contracts, even if the retail customer elects to purchase electricity from an alternative electricity supplier following a fundamental change in regulation of public utilities in this state. See N.C.G.S. § 62-172(a)(15) and (b)(3)b.4. In the event there is a fundamental change in the regulation of public utilities, the Storm Recovery Charges shall be collected from retail electric customers in a manner that will not adversely affect the credit rating on the Storm Recovery Bonds.

In summary, the Securitization Statute permits the recovery of Storm Recovery Costs through Storm Recovery Bonds. Accordingly, to compute the Storm Recovery Charges, DEC first applied the allocation factors to the total first year revenue requirements as presented in witness Jiggetts's DEC Exhibit 3, to allocate the total revenue requirements to each customer rate class. These revenue requirements were grossed-up to reflect uncollectible account write-offs and regulatory fees, to arrive at the storm recovery revenue requirements by rate class. The Storm Recovery Charge for each customer class is calculated by dividing the total revenue requirement allocated to such class by the effective kWh sales forecast.

DEC applied the allocation factors to the customer rate classes in the manner in which these costs or their equivalent costs were allocated in the cost-of-service study approved in the DEC Rate Case, as required by the Securitization Statute. DEC used the allocation factors as well as the sales forecast (by rate class from DEC's most recent base rate proceeding over which the Storm Recovery Charges will be billed) to calculate the proposed initial Storm Recovery Charge per kWh by customer rate class. The resulting Storm Recovery Charges were then set forth in proposed Tariffs, as shown in witness Moore's Exhibit 2.

DEC submitted the True-up Mechanism, which is a formula-based mechanism as described in N.C.G.S. § 62-172(b)(3)b.6, used to calculate, and adjust from time to time, the Storm Recovery Charges for each customer rate class. DEC supported the Financing Orders Petition with the testimony of Duke witness Speros, who provided the True-up Mechanism to determine the Periodic Payment Requirement (defined further below) to be recovered from the Storm Recovery Charge. This True-up Mechanism is attached as Appendix B.

DEC also submitted with its Financing Orders Petition the supporting testimony of Duke witness Moore with respect to allocation of these periodic costs and the computation of the Storm Recovery Charges for each customer rate class for DEC. As discussed in the testimony of Duke witness Jiggetts and shown in Jiggetts's DEC Exhibits 1–4, DEC computed the estimated Storm Recovery Charges, as described in N.C.G.S. § 62-172(a)(15).

The Commission concludes that the cost allocation formula described in DEC's testimony and embedded in the True-up Mechanism is consistent with N.C.G.S. § 62-172(b)(3)b.6 and is reasonable.

In N.C.G.S. § 62-172(k), the State pledges to and agrees with the bondholders, the owners of Storm Recovery Property, and other financing parties that the State and its agencies, including the Commission will not do any of the following: (1) alter the provisions of the Securitization Statute, which authorize the Commission to create an irrevocable contract right or chose in action by the issuance of this Financing Order irrevocable binding, or nonbypassable charges, to create Storm Recovery Property, and make the Storm Recovery Charges imposed by this Financing Order; (2) take or permit any action that impairs or would impair the value of Storm Recovery Property or revises the Storm Recovery Costs for which recovery is authorized; (3) in any way impair the rights and remedies of the bondholders, assignees, and other financing parties; or (4) except for changes made pursuant to the True-up Mechanism, reduce, alter, or impair Storm Recovery Charges that are to be imposed, billed, charged, collected, and remitted for the benefit of the bondholders, any assignee, and any other financing parties until any and all principal, interest, premium, Financing Costs and other fees, expenses, or charges incurred, and any contracts to be performed, in connection with the related Storm Recovery Bonds have been paid and performed in full.

The Commission anticipates that stress case analyses, as described in Duke witness Cimino's testimony, will show that the broad-based nature of the True-up Mechanism under N.C.G.S. § 62-172(b)(3)b.6 and the State Pledge under N.C.G.S. § 62-172(k), will serve to minimize credit risk associated with the Storm Recovery Bonds (i.e., that sufficient funds will be available and paid to discharge the principal and interest when due).

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 40–42** 

**Storm Recovery Charges**

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. These findings and conclusions were not contested by any party.

***Treatment of Storm Recovery Charge in Tariff and on Retail Customer Bills***

DEC submitted a proposed Tariff, included as Moore DEC Exhibit 2 attached to Duke witness Moore's testimony, to impose the Storm Recovery Charge. Pursuant to N.C.G.S. § 62-172(d)(1), the tariffs shall

explicitly reflect that a portion of the charges on such bill represents storm recovery charges approved in a Financing Order issued to the public utility and, if the storm recovery property has been transferred to an assignee, must include a statement to the effect that the assignee is the owner of the rights to storm recovery charges and that the public utility or other entity, if applicable, is acting as a collection agent or servicer for the assignee.

N.C.G.S. § 62-172(d)(1).

Furthermore, the "tariff applicable to customers must indicate the storm recovery charge and the ownership of the charge." *Id.*

The Commission concludes that the form of DEC's proposed Tariff introduced into evidence as Moore DEC Exhibit 2 and attached to Duke witness Moore's testimony includes the required language necessary to effectuate N.C.G.S. § 62-172(d) and is hereby approved.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 43** 

**Storm Recovery Charges**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding. This finding and these conclusions were not contested by any party.

***True-up of Storm Recovery Charges***

Pursuant to N.C.G.S. § 62-172(b)(3)b.6, the servicer of the Storm Recovery Property will file for standard true-up adjustments to the Storm Recovery Charges at least semiannually to ensure Storm Recovery Charge collections are sufficient to provide for the timely payment of the principal of and interest on the Storm Recovery Bonds and of all of the ongoing Financing Costs payable by the DEC SPE in respect of Storm Recovery Bonds as approved under this Financing Order. This required periodic payment of all such amounts will also include deficiencies on past due amounts for any reason for the Storm Recovery Bonds.

Pursuant to N.C.G.S. § 62-172(b)(3)b.6, this Financing Order must include a formula-based true-up mechanism for making expeditious periodic adjustments in the Storm Recovery Charges that retail customers are required to pay pursuant to this Financing Order and for making any adjustments that are necessary to correct for any overcollection or undercollection of the charges or to otherwise ensure the timely payment of the Periodic Payment Requirement (as defined below).

Consistent with N.C.G.S. § 62-172(b)(3)d and the 2021 NC Transactions, DEC proposed to file with the Commission at least semiannually (and at least quarterly beginning 12 months prior to the last scheduled payment date for the latest maturing tranche of the Storm Recovery Bonds) a letter applying the formula-based True-up Mechanism and, based on estimates of consumption for each rate class and other mathematical factors, requesting Commission approval to make the necessary adjustments.

In addition to the semiannual true-up adjustments, DEC proposed that the servicer of the Storm Recovery Property also be authorized to make interim true-up adjustments at any time and for any reason in order to ensure the recovery of revenues sufficient to provide for the timely payment of Periodic Payment Requirement.

The Commission finds DEC's true-up proposals to be reasonable, and also finds that it is just and reasonable that DEC adhere to the following requirements:

After issuance of Storm Recovery Bonds on behalf of DEC, the servicer will submit at least semiannually (and at least quarterly beginning 12 months prior to the last scheduled final payment date of the last maturing tranche of a series of Storm Recovery Bonds) a letter in this docket for Commission review, as described in N.C.G.S. § 62-172(b)(3)d, and in the form attached hereto as Appendix B.

The True-up Adjustment Letter will apply the formula-based True-up Mechanism described herein and in Appendix B to this Financing Order for making expeditious periodic adjustments in the relevant Storm Recovery Charge to correct for any overcollection or undercollection of the charges or to otherwise ensure the timely payment of the Periodic Payment Requirement for each series of the Storm Recovery Bonds.

The "Periodic Payment Requirement" will be composed of the following components for each collection period: (1) the payments of the principal of and interest on the Storm Recovery Bonds issued by the DEC SPE, in accordance with the expected amortization schedule, including deficiencies on past-due principal and interest for any reason; and (2) ongoing Financing Costs payable during the collection period and the costs of funding and/or replenishing the capital subaccount and any other credit enhancements established in connection with the Storm Recovery Bonds and other related fees and expenses.

The first Periodic Payment Requirement established through the Issuance Advice Letter procedures may be calculated based upon a set of collection periods greater or less than twelve collection periods. Notwithstanding the foregoing, in the event that any Storm Recovery Bonds are outstanding following the last scheduled payment date for the tranche of the latest maturing series of Storm Recovery Bonds, the Periodic Payment Requirement will be calculated so that collections are sufficient to make all payments on those Storm Recovery Bonds, and in respect of Financing Costs, no later than the immediately following payment date.

Along with each True-up Adjustment Letter, the servicer shall provide workpapers showing all inputs and calculations, including its calculation of the Storm Recovery Charge by customer rate class. Pursuant to N.C.G.S. § 62-172(b)(3)d, the Commission, upon the filing of a True-up Adjustment Letter made pursuant to this Financing Order, shall render an administrative approval of the request or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible, but no later than 30 days following the servicer's true-up filing. Notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 30 days of the servicer's true-up filing. If no action is taken within 30 days of the filing of the True-up Adjustment Letter, the true-up calculation shall be deemed approved. Upon approval or the passage of 30 days without notification of a mathematical or clerical error, no further action of the Commission will be required prior to implementation of the true-up.

To ensure adequate Storm Recovery Charge collections and to avoid large overcollections and undercollections over time, the Commission directs that the servicer shall reconcile Storm Recovery Charges using DEC's most recent forecast of electricity deliveries (i.e., forecasted billing units and Commission-approved customer class allocations) used for all corporate purposes and DEC's estimates of related expenses. Each periodic true-up adjustment should ensure that Storm Recovery Charge collections are sufficient to meet the Periodic Payment Requirement. The calculation of the Storm Recovery Charges will also reflect both a projection of uncollectible Storm Recovery Charges and a projection of payment lags between the billing and collection of Storm Recovery Charges based upon DEC's most recent experience regarding collection of Storm Recovery Charges.

Based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that the True-up Mechanism is reasonable and appropriate. The Commission therefore approves the True-up Mechanism and directs that each True-up Adjustment Letter shall be based upon the cumulative differences, regardless of the reason, between the Periodic Payment Requirement (including scheduled principal and interest payments on the Storm Recovery Bonds) and the amount of Storm Recovery Charge collections and estimated Storm Recovery Charge collections to the indenture trustee.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 44–47** 

**Bond Advisory Team Composition and Decision-Making**

The evidence supporting these findings of fact is contained in the Financing Orders Petition, the testimony and exhibit of Duke witness Heath, the testimony of the Public Staff witnesses, the Financing Order Stipulation and the entire record in this proceeding.

Duke witnesses testified about the success of the 2021 NC Transactions. Duke witness Heath stated that the bond advisory team process that has been adopted into the Commission Rules was successful in the 2021 NC Transactions and other recent Duke utility securitization transactions, and that all bonds were oversubscribed by investors.

Public Staff witnesses Barlotta, Newman, and Snider discussed work that would commence if the Commission elects to issue a Financing Order in this proceeding, namely the credit rating agency, structuring, marketing, and pricing processes for the Storm Recovery Bonds and the Bond Advisory Team's role therein. Tr. at 383–98. Public Staff witnesses Barlotta, Newman, and Snider recommended, among other things, that the Bond Advisory Team be updated throughout the marketing and pricing process, with access to electronic facilities to monitor the actual pricing process on a real-time basis. *Id*. at 395. They testified that this process of testing and retesting provides assurance that the Storm Recovery Bonds in fact have been sold at the lowest rates reasonably consistent with market conditions on the day and time of pricing based on their structure and specific credit and legal characteristics. *Id*.

While Public Staff witnesses Bartolotta, Newman, and Snider recommended that it would be appropriate for the Commission to require a certification from the Public Staff's consultant similar to the one required from the underwriter(s) and the Commission's consultant, they alternatively recommended that the Financing Order require at least a statutory benefits confirmation letter from the Public Staff's consultant, without material qualification, confirming what they have done has in fact met the lowest charge standard of N.C.G.S § 62-172(b)(3)b.3. *Id*. at 318, 396.

Similar to the process approved by the Commission for use in the 2021 NC Transactions, the Financing Order Stipulation provides that the Public Staff's consultant may file a letter with the Commission opining as to whether the structuring, marketing and pricing of the Storm Recovery Bonds achieved the Statutory Cost Objectives.

Based on Rule R8-75 and the previous success of the Bond Advisory Team structure, the Commission concludes, based upon all the evidence, that an advisory body shall be established consisting of DEC, the Commission, the Public Staff, and any designated staff of or consultant to DEC, the Commission, and the Public Staff (Bond Advisory Team). The Bond Advisory Team shall have the role and responsibilities set forth in Rule R8-75(e) and hereafter in this Financing Order.

DEC will have the responsibility for all decisions regarding the structuring, marketing, and pricing of the Storm Recovery Bonds, with input and advice from the other members of the Bond Advisory Team.

As required in Rule R8-75(e)(5), DEC shall have all decision making authority with respect to the structuring, marketing and pricing of the Storm Recovery Bonds, but the Commission makes clear that the Public Staff has an important statutory duty and responsibility under N.C.G.S. § 62-15(d) to intervene — as it has done in this docket — on behalf of the using and consuming public in all Commission proceedings affecting the rates or service of any public utility. The Commission also notes that the Public Staff has a special role to advocate for and protect ratepayers. However, the Public Staff has no statutory duty or express authority to make decisions on behalf of public utilities. In its discretion, the Commission declines to invest the Public Staff with decision-making authority under N.C.G.S. § 62-172(b)(3)b.12. The Commission deems it more consistent with the Public Staff's unique and critical role in the regulation of public utilities in North Carolina for the Public Staff to provide independent input and analysis with respect to the issuance of the Storm Recovery Bonds. A letter from the Public Staff's consultant as to whether the structuring, marketing, and pricing of the Storm Recovery Bonds achieved the lowest Storm Recovery Charges consistent with prevailing market conditions at the time of pricing, and the terms of this Financing Order, along with a report of any action or inaction which the Public Staff's consultant believes caused the transaction or transactions not to achieve the lowest Storm Recovery Charges protections will assist the Commission in determining whether the best interests of ratepayers are being served by issuance of the Storm Recovery Bonds.

The Commission understands that in the final weeks and days before the Storm Recovery Bonds are issued, important decisions may need to be made in a short time frame. After the Storm Recovery Bonds are priced and DEC files the Issuance Advice Letter, the Commission has only until noon on the third business day after pricing in order to determine whether the proposed issuance complies with this Finance Order. In order that the Commission may respond in a timely and informed manner, the Commission may choose to participate on the Bond Advisory Team through any or all of the following: a designated Commissioner or Commissioners, designated Commission Staff, outside counsel, or a financial consultant. The Commission's participation in the Bond Advisory Team will not involve formal decision-making. Rather, the Commission will remain apprised of the pricing, structuring, and marketing of the Storm Recovery Bonds through the Bond Advisory Team.

The Commission notes that it is authorized, but not obligated, to receive outside expert assistance under N.C.G.S. § 62-172(n) for the purpose of providing the Commission with a neutral expert report to inform its final decision.

Consistent with Rule R8-75(e), in order for the Bond Advisory Team to perform its duties and to participate fully and in advance regarding all aspects of structuring, marketing, and pricing the Storm Recovery Bonds, the Commission emphasizes that DEC must provide the entire Bond Advisory Team with timely information and must invite the entire Bond Advisory Team to participate in Bond Advisory Team meetings. The Bond Advisory Team must be given an opportunity to review and comment on all aspects of the structuring, pricing, and marketing of the Storm Recovery Bonds including without limitation the selection and retention of underwriters and other transaction participants, the terms of all Transaction Documents, the length of the bond terms, the interest rates of the bonds, the capitalization of the bonds, the transaction structure, the issuance strategy, pricing strategy, appropriate credit enhancements, and the credit rating process. However, as provided in Rule R8-75(e)(4) DEC shall have the sole right to select all counsel and advisors for DEC, the DEC SPE and the underwriters.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 48** 

**Issuance Advice Letter**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

In its Financing Orders Petition, Duke proposed an Issuance Advice Letter process whereby DEC and DEP certify that the structuring, marketing, and pricing of the storm recovery bonds meet the Statutory Cost Objectives, with the Commission having the final say on whether the transaction is consummated or not. *See* Financing Orders Pet. Exs. A–B at App. C, Attach. 8.

Pursuant to N.C.G.S. § 62-172(b)(3)b.3, the Commission is required to find that the structuring and pricing of the Storm Recovery Bonds are reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in such Financing Order. Additionally, N.C.G.S. § 62-172(b)(3)b.10 requires DEC to determine the initial Storm Recovery Charge in accordance with this Financing Order.

Appendix C, Attachment 8 to this Financing Order requires DEC to make the following certification:

Based on the statutory criteria and procedures, the record in this proceeding, and other provisions of this Financing Order, DEC certifies the statutory requirements for issuance of a financing order and Storm Recovery Bonds have been met, specifically that the issuance of the Storm Recovery Bonds on behalf of DEC and the imposition and collecting of Storm Recovery Charges authorized by this Financing Order provide quantifiable benefits to customers of DEC as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and that the structuring and pricing of the Storm Recovery Bonds issued on behalf of DEC result in the lowest Storm Recovery Charges payable by the customers of DEC consistent with market conditions at the time such Storm Recovery Bonds are priced an the terms set forth in the Financing Order.

Thus, the Securitization Statute and this Financing Order establish a lowest Storm Recovery Charge standard that DEC must achieve. Moreover, the Securitization Statute and Financing Order create a legal obligation for DEC to certify its achievement of this standard in order for the Commission to approve DEC's Issuance Advice Letter and allow the actual issuance of the Storm Recovery Bonds to go forward. Therefore, the Commission finds and concludes that DEC's certification will constitute competent, material, and substantial evidence that the Statutory Cost Objectives have been achieved.

Accordingly, the Commission directs DEC to file the Issuance Advice Letter along with the True-up Adjustment Letter in final form with the Commission within one business day after actual pricing. Together, the Issuance Advice Letter and True-up Adjustment Letter shall include the following information: the actual structure of the Storm Recovery Bond issuance; the scheduled final payment dates and legal maturities of the Storm Recovery Bonds, which shall be under the direct control of DEC and its counsel at DEC's sole discretion; over-collateralization levels (if any); any other credit enhancements; revised estimates of the up-front Financing Costs proposed to be financed and estimates of the ongoing Financing Costs for the first collection period, and other information specific to the Storm Recovery Bonds from proceeds of the Storm Recovery Bonds. Finally, the Issuance Advice Letter shall include certifications from DEC that the final structuring, marketing, and pricing of the Storm Recovery Bonds in fact achieved the Statutory Cost Objectives.

The actual details of the transaction, including certifications from the lead underwriters, Commission consultants, and DEC included with the Issuance Advice Letter, shall be provided no later than the first business day after pricing. Unless the Commission issues an order denying approval of the Storm Recovery Bond issuance before noon on the third business day after pricing, the transaction shall thereupon proceed without any further action by the Commission. The Commission retains discretion either to allow the transaction to be completed or to issue an order to stop the transaction if the Commission does not receive the required certifications or if the certifying parties are unable or unwilling to deliver the required certifications in a form acceptable to the Commission. The Commission shall only issue an order to stop the transaction if the Commission determines that: (1) the transaction does not comply with this Financing Order, including the lowest Storm Recovery Charge standard, or (2) the Commission has not received the required certifications in a form acceptable to the Commission.

DEC will retain sole discretion regarding whether or when to assign, sell, or otherwise transfer any rights concerning Storm Recovery Property arising under this Financing Order, or to cause the issuance of any Storm Recovery Bonds authorized in this Financing Order; provided, however, that any issuance must satisfy the Statutory Costs Objectives and shall be subject to the provisions of the preceding paragraph. Subject to the Issuance Advice Letter procedures and the Commission's power to issue an order to stop the transaction as described above, the DEC SPE will issue the Storm Recovery Bonds on or after the fifth business day after pricing of the Storm Recovery Bonds.

In the event either of the following occurs: (1) DEC determines that the issuance of the Storm Recovery Bonds would not achieve the Statutory Cost Objectives; or (2) the Commission will not permit issuance of the Storm Recovery Bonds, then as provided in N.C.G.S. § 62-172(c)(3), DEC shall not be precluded from seeking to recover Financing Costs incurred and Carrying Costs accrued after issuance of the Prudency Review Order in its next general rate case.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 49–51** 

**Certifications and Opinions**

The evidence supporting these findings of fact is contained in the testimony and exhibits of the witnesses, the Financing Order Stipulation and the entire record in this proceeding.

The purpose of an Issuance Advice Letter is to confirm for the Commission that the structuring, marketing, and pricing of the Storm Recovery Bonds have satisfied the Statutory Cost Objectives.

DEC recommended that this Financing Order also require delivery of certifications from each lead underwriters and from the Commission's financial consultant, without material qualifications, confirming what they have done has in fact met the lowest charge standard of N.C.G.S. § 62-172(b)(3)b.3.

The Public Staff witnesses recommended that this Financing Order also require delivery of certifications from the Public Staff's consultant, without material qualifications, similar to the required certification from the underwriter(s), or absent a certification, a statutory benefits confirmation letter.

In rebuttal, Duke witness Heath opposed the Public Staff's consultant filing a formal certification but did not oppose such consultant providing a letter opining as to whether the structuring, marketing and pricing of the Storm Recovery Bonds achieved the Statutory Cost Objectives.

In the Financing Order Stipulation, the Stipulating Parties agreed and stipulated that the Public Staff's consultant may file a statutory benefits confirmation letter with the Commission.

Based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that it is just, reasonable, and appropriate to require that written certifications, without material qualification, be provided by each of the lead underwriters. It is just and reasonable for each lead underwriter of the Storm Recovery Bonds be required to deliver to the Commission an independent certificate confirming that the structuring, marketing, and pricing of the Storm Recovery Bonds in fact resulted in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order. The Commission retains discretion either to allow the transaction to be completed or to issue an order to stop the transaction if any lead underwriter fails to deliver the required certification or is unable or unwilling to deliver the required certification in a form acceptable to the Commission.

Finally, if the Commission elects to retain an independent advisor pursuant to N.C.G.S. § 62-172(n), its consultant will be responsible for certifying that the structuring, marketing, and pricing of the Storm Recovery Bonds achieve the lowest Storm Recovery Charges consistent with prevailing market conditions at the time of pricing and the terms of this Financing Order. If the Commission elects to retain an independent consultant, the Commission's independent consultant(s) will provide a certification no later than the date the Issuance Advice Letter is filed. If the Commission's consultant is unable to provide such certification, it must fully explain the reasons in writing. The Commission retains discretion either to allow the transaction to be completed or to issue an order to stop the transaction if its consultant is unwilling or unable to deliver the required certification in a form acceptable to this Commission.

Consistent with the 2021 NC Transactions and the Financing Order Stipulation, the Commission concludes that it is reasonable, appropriate, and in the public interest for the Public Staff's consultant to provide a letter as to whether the structuring, marketing, and pricing of the Storm Recovery Bonds achieved the Statutory Cost Objectives. The letter shall include a report of any action or inaction which the Public Staff's consultant believes caused the transaction not to achieve the Statutory Cost Objectives.

**EVIDENCE AND CONCLUSIONS FOR FINDING OF FACT NO. 52** 

**Flexibility**

The evidence supporting this finding of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Section § 62-172(b)(3)b.8 requires the Commission to specify the degree of flexibility to be afforded to DEC in establishing the terms and conditions of the Storm Recovery Bonds, including, but not limited to, repayment schedules, expected interest rates, and other Financing Costs consistent with N.C.G.S. § 62-172(b)(3)b.1–7.

Throughout this Financing Order, the Commission has granted DEC flexibility within parameters. For instance, the DEC SPE may issue Storm Recovery Bonds with a scheduled final payment date of approximately 20 years, inclusive, from the date of the issuance of the Storm Recovery Bonds and the legal maturity date may be longer in accordance with rating agency requirements. Pursuant to Duke witness Cimino's testimony, this difference provides additional credit protection, allowing shortfalls in principal payments to be recovered over an additional time period and therefore helping in achieving the targeted AAA or equivalent ratings. It is not necessary to enumerate here every instance in which the Commission has given DEC flexibility to establish the terms and conditions of the Storm Recovery Bonds.

The Commission finds that Storm Recovery Bonds may be issued in one or more series, each series of Storm Recovery Bonds may be issued in one or more tranches, and the Storm Recovery Bonds must be structured by DEC to achieve the Statutory Cost Objectives. Further, the Storm Recovery Bonds shall be structured such that the payment of the principal of and interest on the Storm Recovery Bonds is expected to be substantially level on an annual basis over those terms.

DEC shall be afforded flexibility in determining the final terms of the Storm Recovery Bonds, including payment and maturity dates, interest rates (or the method of determining interest rates), the terms of any interest rate swap agreement, interest rate lock or similar agreement, the creation and funding of any supplemental capital, reserve or other subaccount, and the issuance of Storm Recovery Bonds through either one SPE or multiple SPEs, except as otherwise provided in this Financing Order.

As noted above, certain costs, such as debt service on the Storm Recovery Bonds, as well as the ongoing fees of the trustee, rating agency surveillance fees, regulatory assessment fees, and the costs of any other credit enhancement or interest rate swaps, will not be known until after the pricing of a series of Storm Recovery Bonds. This Financing Order provides flexibility to recover such costs through the Storm Recovery Charge and the true-up of such charge. In this Financing Order the Commission has established the Issuance Advice Letter, Bond Advisory Team, and independent certification procedures in order to grant DEC flexibility, while still ensuring that the structuring, marketing, and pricing of Storm Recovery Bonds achieve the Statutory Cost Objectives.

Based upon the foregoing competent, material, and substantial evidence in the whole record, the Commission concludes that a bond structure that provides for substantially levelized annual revenue requirements over the expected life of the Storm Recovery Bonds is in the public interest and should be used. This structure offers the benefit of not relying upon public utility customer growth and will allow the resulting overall weighted average Storm Recovery Charges to remain level or decline over time, if billing determinants remain level or grow.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 53–54** 

**Statutory Cost Objectives**

The evidence supporting these findings of fact is contained in the Financing Orders Petition and exhibits, the testimony and exhibits of the witnesses, and the entire record in this proceeding.

Section 62-172(b)(1)g, requires a public utility petitioning the Commission for a Financing Order to provide "a comparison between the net present value of the costs to customers that are estimated to result from the issuance of Storm Recovery Bonds and the costs that would result from the application of the traditional method of financing and recovering Storm Recovery Costs from customers." In addition, N.C.G.S. § 62-172(b)1.g requires a public utility petitioning the Commission for a Financing Order to demonstrate that "the comparison should demonstrate that the issuance of storm recovery bonds and the imposition of Storm Recovery Charges are expected to provide quantifiable benefits to customers."

In accordance with N.C.G.S. § 62-172(b)(1)g, DEC must show that the net present value of the costs to customers using securitization is less than the net present value of the costs that would result under traditional storm cost recovery.

DEC provided the cost comparison required by N.C.G.S. § 62-172(b)(1)g. in witness Jiggetts's DEC Exhibit 5. Jiggetts's DEC Exhibit 5 calculates both the total estimated net present value of costs to customers under the Storm Recovery Charges as well as the total net present value of costs to customers under the traditional cost recovery method. Therefore, as an initial matter, the Commission concludes that DEC has provided the necessary comparison required by N.C.G.S. § 62-172(b)(1)g.

As shown in Jiggetts's DEC Exhibit 5, using the traditional method of cost recovery, the net present value of total retail costs to customers is approximately $397.14 million. Using the storm securitization method of cost recovery and recovering Storm Recovery Costs through the Storm Recovery Charge, the net present value of total retail costs to customers is approximately $333.32 million assuming a 20-year bond period. This results in approximately $63.82 million, or approximately 16.1 percent, of quantifiable benefits to customers. Tr. at 184–85. The calculation is detailed in DEC's Jiggetts Corrected Supplemental Exhibit 5.

Based upon the foregoing competent, material, and substantial evidence in the whole record and pursuant to N.C.G.S. § 62-172(b)(3)b.2., the Commission expects that the issuance of the Storm Recovery Bonds and the imposition of the Storm Recovery Charges authorized by this Financing Order will provide quantifiable benefits to customers as compared to the costs that would have been incurred under the traditional cost recovery method.

Additionally, the Commission finds and concludes that there is competent, material, and substantial evidence in the whole record demonstrating that the process established by DEC and as set forth in this Financing Order relative to the structuring and pricing of the Storm Recovery Bonds, along with the continued oversight of the Commission through the Bond Advisory Team, the Issuance Advice Letter process, and the certifications and letter required by Findings of Fact Nos. 49–51, are reasonably expected to result in the lowest Storm Recovery Charges consistent with market conditions at the time the storm recovery bonds are priced and the terms set forth in this Financing Order, as required by N.C.G.S. § 62-172(b)(3)b.3. The record in this case demonstrates that professionals who collectively possess decades of experience in pricing, structuring, and marketing complex securities, including utility securitization bonds, will provide their expertise to the pricing, structuring, and marketing of the Storm Recovery Bonds through their participation on the Bond Advisory Team. Many of them were involved in the successful $1.1 billion securitization of DEC's and DEP's Storm Recovery Costs in 2021. The terms of this Financing Order are similar in many respects to the DEC and DEP 2021 NC Financing Orders. The testimony of the witnesses for DEC manifests their intention and ability to achieve the lowest possible Storm Recovery Charges for North Carolina ratepayers. Importantly, this Financing Order establishes a robust and flexible procedure to allow DEC to address the requirements of market participants or any changes in market conditions as the issuance date approaches. After the bonds are priced, the major participants will report to the Commission — and in the case of DEC, the lead underwriters, and the Commission's financial consultant (if applicable) — will give a certification as to whether the Statutory Cost Objectives have been met. After participating in the Bond Advisory Team and reviewing the certifications, the Commission has a final opportunity to approve or disapprove issuance of the Storm Recovery Bonds.

**EVIDENCE AND CONCLUSIONS FOR FINDINGS OF FACT NOS. 55–56** 

**Potential Corporate Consolidation**

The evidence supporting these findings of fact is contained in the rebuttal testimony of Duke witness Heath, and the entire record in this proceeding.

In rebuttal testimony, Duke witness Heath proposed an additional clause be added to the Financing Order regarding a potential merger between DEC and DEP. The language proposed is intended to maintain the flexibility for DEC and the Commission without committing to any specific outcome for prejudging any future proposals related to the potential merger of DEC and DEP and was proposed to reassure investors in the Storm Recovery Bonds that any decisions of the Commission with respect to a potential merger would comply with the terms of the Securitization Statute and this Financing Order. The additional clause was included in their Proposed Financing Order, filed in this docket.

Based upon the foregoing competent, material, and substantial evidence, the Commission concludes that the addition of Findings of Fact Nos. 55–56 is prudent and should be included in this Financing Order.

IT IS, THEREFORE, ORDERED as follows:

**Approval of Application**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. That DEC's Financing Orders Petition for the issuance of a Financing Order pursuant to the Securitization Statute is approved, as provided in this Financing Order;

**Approval of Financing Order Stipulation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. That the Financing Order Stipulation is hereby approved in its entirety;

**Mitigation of Rate Impacts**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. That DEC's comparison between the net present value of the costs to customers that are estimated to result from Storm Recovery Bonds and the costs that would result from the application of the traditional method of financing and recovering Storm Recovery Costs from customers satisfies the terms of the Securitization Statute and Commission Rules;

**Authority to Finance Using Securitization**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. That DEC's Financing Orders Petition for Financing Orders authorizing the issuances by DEC and DEP of Storm Recovery Bonds in one or more series is granted as to DEC, subject to the terms set forth in the body of this Financing Order and the related Financing Order for DEC. DEC is hereby authorized to cause the issuance by the DEC SPE of Storm Recovery Bonds secured by the pledge of Storm Recovery Property, in one or more series in an aggregate principal amount not to exceed the Securitizable Balance as of the date the first series of Storm Recovery Bonds are issued. The proceeds received by DEC from the DEC SPE's sale of such bonds are to be used by DEC to finance the equivalent of:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(a) recovery of Storm Recovery Costs, which includes Carrying Costs necessary to account for the number of
days, as applicable, either greater than or less than assumed in the Carrying Costs calculation, calculated at DEC's relevant approved
after tax cost of debt as adjusted in the Issuance Advice Letter in accordance with any determination of the Commission as a result of
the audit of post-rate case Storm Recovery Costs as described in this Financing Order; and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;(b) recovery of the up-front Financing Costs incurred in connection with issuance of the Storm Recovery Bonds.

Carrying Costs and up-front Financing Costs are subject to update, adjustment, and approval pursuant to the terms of this Financing Order and the Issuance Advice Letter procedures as provided by this Financing Order.

**Outside Costs**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. That the costs associated with the Commission's and the Public Staff's outside consultants and outside counsel, if any, to the extent such costs are eligible for compensation and approved for payment under the terms of such party's contractual arrangements with the Commission or the Public Staff, as such arrangements may be modified by any amendment entered into at the Commission's or the Public Staff's sole discretion, will qualify as up-front Financing Costs and be paid from proceeds of Storm Recovery Bonds;

**Structure**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. That the proposed transaction structure for the Storm Recovery Bonds, as set forth in the body of this Financing Order, is approved;

**IRS Safe Harbor Provisions**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. That DEC shall structure the Storm Recovery Bond transactions in a way that complies with the safe harbor provisions of the IRS Revenue Procedure;

**SPE**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;8. That DEC is authorized to form one or more DEC SPEs to be structured as discussed in this Financing Order. DEC is authorized to execute one or more limited liability company agreements, consistent with the form included as Heath Exhibit 2e to witness Heath's testimony and the terms and conditions of this Financing Order. The DEC SPE shall be funded with an amount of capital that is sufficient for the DEC SPE to carry out its intended functions as contemplated in the Financing Orders Petition and this Financing Order. The Commission approves an initial capital contribution of 0.5 percent of the initial aggregate principal amount of a series of Storm Recovery Bonds or such greater amount as the credit rating agencies shall require. The capital contributions by DEC to the DEC SPE shall be funded by DEC and not from the proceeds of the sale of Storm Recovery Bonds. DEC will be permitted to earn a rate of return on its invested capital in DEC SPE equal to the rate of interest payable on the longest maturing tranche of Storm Recovery Bonds, provided, however that such rate shall not exceed DEC's after-tax WACC approved by the Commission in Docket No. E-7, Sub 1276, and this return on invested capital should be a component of the Periodic Payment Requirement;

**Issuance**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;9. That in accordance with the terms of this Financing Order and subject to the criteria and procedures described herein, the DEC SPE is authorized to issue Storm Recovery Bonds in an aggregate principal amount not to exceed the Securitizable Balance (as of the date the Storm Recovery Bonds are issued) and may pledge to an indenture trustee, as collateral for payment of the Storm Recovery Bonds, the Storm Recovery Property, including the DEC SPE's right to receive the related Storm Recovery Charges as and when collected, the DEC SPE's rights under the servicing agreement and other collateral described in the indenture. Subject to the terms of this Financing Order DEC retains sole discretion regarding whether to assign, sell, or otherwise transfer Storm Recovery Property or to cause the Storm Recovery Bonds to be issued, including the right to defer or postpone such assignment, sale, transfer, or issuance;

**Form Agreements**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;10. That the Commission finds good cause to authorize DEC to provide service to the DEC SPE under the servicing agreement and for the servicing agreement to become effective at the time the transaction is permitted to proceed pursuant to the terms of this Financing Order. The Commission finds good cause to authorize DEC to administer the DEC SPE under the administration agreement and for the administration agreement to become effective at the time the transaction is permitted to proceed pursuant to the terms of this Financing Order. The Commission finds good cause to authorize DEC to enter into a purchase and sale agreement with the DEC SPE to become effective at the time the transaction is permitted to proceed pursuant to the terms of this Financing Order;

**Servicing and Administrative Fees**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;11. That DEC will establish a regulatory asset or regulatory liability account separate and apart from the regulatory assets and liabilities of other types of securitization-related costs and benefits, for the purpose of tracking (as received and incurred) servicing and administration fees received by DEC from the DEC SPE and the incremental costs incurred by DEC in fulfilling the required functions under the servicing and administration agreements. Any regulatory asset or regulatory liability account established pursuant to this paragraph shall accrue carrying costs at DEC's net-of-tax WACC, and be considered for recovery from or returned to customers in DEC's next general rate case;

**DEC as Servicer**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;12. That DEC shall act as initial servicer under the proposed financing transaction and is granted flexibility to act as servicer pursuant to the servicing agreement discussed in this Financing Order;

**Third-Party Supplier**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;13. That if the State of North Carolina or the Commission decides to allow billing, collection, and remittance of the Storm Recovery Charges by a third party supplier within the DEC service territory, such authorization will be consistent with the rating agencies' requirements necessary for the Storm Recovery Bonds to receive and maintain the targeted AAA rating as described in Finding of Fact No. 29;

**Creation of Storm Recovery Property**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;14. That the creation of the DEC Storm Recovery Property as described in this Financing Order is approved and, upon transfer of the Storm Recovery Property to the DEC SPE, shall be created, and shall consist of: (1) all rights and interests of DEC or its successors or assignees under this Financing Order, including the right to impose, bill, charge, collect, and receive Storm Recovery Charges authorized in this Financing Order and to obtain periodic adjustments to such charges as provided in this Financing Order, and (2) all revenues, collections, claims, rights to payments, payments, money, or proceeds arising from the rights and interests specified in this Financing Order, regardless of whether such revenues, collections, claims, rights to payment, payments, money, or proceeds are imposed, billed, charged, received, collected, or maintained together with or commingled with other revenues, collections, rights to payment, payments, money, or proceeds. The creation of Storm Recovery Property is conditioned upon, and shall be simultaneous with, the sale or other transfer of the Storm Recovery Property to the DEC SPE, the issuance of the Storm Recovery Bonds, and the pledge of the Storm Recovery Property to secure the Storm Recovery Bonds;

**Recovery of Storm Recovery Charges**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;15. That DEC shall impose on, and shall collect, as initial servicer, from all existing and future retail customers receiving transmission or distribution service, or both, from DEC, even if such customer elects to purchase electricity from an alternative supplier, Storm Recovery Charges in an amount sufficient to provide for the timely recovery of its Periodic Payment Requirement detailed in this Financing Order, including, without limitation, payment of principal and interest on the Storm Recovery Bonds;

**Approval of Tariffs**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;16. That the form of the Tariff schedule as shown in Moore DEC Exhibit 2 is approved;

**Partial Payment**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;17. That If any customer does not pay the full amount it has been billed, the amount collected will be prorated among all charge categories, including the Storm Recovery Charges and any other storm recovery charges approved by the Commission and charges of DEC, in proportion to their percentage of the overall bill;

**Imposition and Collection, Nonbypassability**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;18. That DEC is authorized to impose, bill, charge, collect, receive, and adjust from time to time pursuant to the True-up Mechanism as described in this Financing Order a Storm Recovery Charge, to be collected on a per kWh basis from each of its existing and future retail customers until the related Storm Recovery Bonds are paid in full and all related Financing Costs and other costs of the bonds have been recovered in full. Such Storm Recovery Charges shall be nonbypassable charges that are separate and apart from DEC's base rates and shall be paid by all DEC jurisdictional existing and future retail customers receiving transmission or distribution service, or both, from DEC or its successors or assignees under Commission-approved rate schedules as provided in this Financing Order. Such Storm Recovery Charges shall be in amounts sufficient to ensure the timely recovery of DEC's Storm Recovery Costs and Financing Costs (up-front and ongoing) detailed in this Financing Order and the Issuance Advice Letter, including payment of principal of and interest on the Storm Recovery Bonds;

**Allocation**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;19. That the debt service and other financing costs associated with the Storm Recovery Bonds shall be allocated to the customer rate classes based on DEC's approved allocation methodology in the proposed Tariff; and that it is just and reasonable that the Storm Recovery Charges be adjusted for any changes to the customer allocation methodology approved by the Commission in subsequent general rate proceedings for DEC;

**Collection Period**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;20. That this Financing Order and the Storm Recovery Charges authorized hereby shall remain in effect until the Storm Recovery Bonds and all Financing Costs (including tax liabilities) related thereto have been paid or recovered in full. This Financing Order shall remain in effect and unabated notwithstanding the reorganization, bankruptcy, or other insolvency proceedings of DEC or its successors or assignees. Following repayment of the Storm Recovery Bonds and the relevant Financing Costs authorized in this Financing Order and release of the funds by the indenture trustee, the DEC SPE shall distribute the final balance of its collection account to DEC, and DEC shall credit other electric rates and charges by a like amount, less the amount in the tail-end subaccount, which shall be recorded as a regulatory liability for remittance to ratepayers in DEC's next general rate case and the amount of the relevant capital subaccount and any unpaid return on invested capital due to DEC as set forth in the body of this Financing Order, which shall be returned to DEC;

**Ownership Notification and Separate Line Item Charge**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;21. That the electric bills of DEC shall reflect that a portion of the charges on such bill represents Storm Recovery Charges approved in this Financing Order and must include a statement to the effect that the DEC SPE is the owner of the rights to Storm Recovery Charges and that DEC is acting as servicer for the DEC SPE. The Tariff applicable to customers must indicate the Storm Recovery Charge and the ownership of that charge. DEC shall identify amounts owed with respect to its Storm Recovery Property in accordance with the Securitization Statute. DEC will discuss the bill presentation of the Storm Recovery Charge with the Bond Advisory Team to ensure compliance with the Securitization Statute. If any customer does not pay the full amount it has been billed, the amount collected will be prorated among all charge categories, including the Storm Recovery Charges and any other storm recovery charges approved by the Commission and charges of DEC, in proportion to their percentage of the overall bill;

**True-up Mechanism**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;22. That the True-up Mechanism identified in Appendix B to this Financing Order is approved and shall be applied at least semiannually (and at least quarterly beginning 12 months prior to the last scheduled final payment date of the last maturing tranche of a series of Storm Recovery Bonds);

**True-up Adjustment Letter**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;23. That DEC or its assignee(s) are authorized to recover the Periodic Payment Requirement and shall file with the Commission at least semiannually (and at least quarterly beginning 12 months prior to the last scheduled payment date of the latest maturing tranche of a series of Storm Recovery Bonds) a True-up Adjustment Letter as described in this Financing Order, which shall be based upon the cumulative differences, regardless of the reason, between the Periodic Payment Requirement and the actual amount of Storm Recovery Charge remittances to the indenture trustee for the series of Storm Recovery Bonds. Upon the filing of a True-up Adjustment Letter made pursuant to this Financing Order, the Commission shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 30 days following the servicer's true-up filing; and that notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 30 days of the servicer's filing of a True-up Adjustment Letter. No potential modification to correct an error in a True-up Adjustment Letter shall delay its effective date and any correction or modification which could not be made prior to the effective date shall be made in the next True-up Adjustment Letter. Upon administrative approval or the passage of 30 days without notification of a mathematical or clerical error, no further action of the Commission will be required prior to implementation of the true-up;

**Changes to Storm Recovery Charges**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;24. That upon any change to customer rates and charges stemming from the True-up Mechanism, DEC shall file appropriately revised tariff sheets with the Commission, provided, however, that approval of the Storm Recovery Charges shall not be delayed or otherwise adversely impacted by the Commission's decision with respect to the tariff;

**Public Staff Audit of the Ongoing Financing Costs**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;25. That the Public Staff shall be permitted to perform a limited audit of the Ongoing Financing Costs as described in this Financing Order and present its findings to the Commission; provided, however, that unless an adjustment to the Storm Recovery Charges is necessary to correct for a mathematical or clerical error, the Commission shall not make any adjustments to Storm Recovery Charges as a result of the Public Staff audit, but the findings of the Public Staff audit shall instead be resolved at DEC's next general rate case. In the event Ongoing Financing Costs are determined in a separate proceeding by the Commission to have incurred as a result of gross negligence, reckless, or willful misconduct by either DEC or the DEC SPE, DEC shall create a regulatory liability in the amount determined appropriate by the Commission to be returned to customers, with carrying costs at DEC's net-of-tax WACC, in the next general rate case;

**Bond Advisory Team**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;26. That a Bond Advisory Team shall be formed, consisting of representatives of DEC, the Commission, and the Public Staff, each of which may designate staff, counsel, and consultants to participate on the Bond Advisory Team. However, none of the Public Staff, any designee of the Public Staff, the Commission and any designee of the Commission are agents of DEC by their participation on the Bond Advisory Team;

**Decision-making**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;27. That DEC, shall make all decisions regarding pricing, structuring, and marketing the Storm Recovery Bonds, with advice and input from the other members of the Bond Advisory Team; and that the final structure of the transaction, including pricing, shall be subject to review by the Commission to ensure that all requirements of the Securitization Statute and this Financing Order have been met;

**Roles of the Bond Advisory Team**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;28. That DEC shall provide all members of the Bond Advisory Team with timely information so they may be informed fully and in advance regarding all aspects of the structuring, marketing, and pricing of the Storm Recovery Bonds. The members of the Bond Advisory Team are entitled to be present during communications with underwriters, credit rating agencies, and investors. DEC shall invite all members of the Bond Advisory Team to join all Bond Advisory Team meetings to review and comment on all aspects of the structuring, pricing, and marketing of the Storm Recovery Bonds, including without limitation the selection and retention of underwriters and other transaction participants; the terms of all Transaction Documents; the length of the terms of the Storm Recovery Bonds; the interest rates of the Storm Recovery Bonds (including whether the interest rate is floating or fixed); the capitalization of the Storm Recovery Bonds; the transaction structure; the issuance strategy; appropriate credit enhancements; and the credit rating process, except that that DEC shall have sole right to select and engage all counsel and advisors for DEC, the DEC SPE, and the underwriters;

**Issuance Advice Letter**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;29. That DEC shall file an Issuance Advice Letter along with the True-up Adjustment Letter in final form with the Commission no later than one business day after actual pricing, substantially in the form of Appendix C to this Financing Order describing the final structure and terms of the Storm Recovery Bond issuance, including an updated accounting of the up-front Financing Costs and the final Carrying Costs. The Issuance Advice Letter shall include certifications from DEC that the structuring, pricing, and marketing of the Storm Recovery Bonds in fact achieved the Statutory Cost Objectives. Unless the Commission issues an order stopping the Storm Recovery Bond issuance before noon on the third business day after pricing because the Commission determines that the Issuance Advice Letter and all required certifications have not been delivered or the transaction does not comply with this Financing Order, the transaction shall proceed without any further action of the Commission. The Commission shall only issue an order to stop the transaction if the Commission determines that: (a) the transaction does not comply with this Financing Order, or (b) the Commission is not satisfied with the certifications it has received pursuant to Findings of Fact Nos. 48, 50, and 51;

**Other Certifications and Opinions**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;30. That, no later than the date that DEC files the Issuance Advice Letter with the Commission, the following shall be done: (a) each lead underwriter shall file an independent certification with the Commission confirming that the structuring, marketing, and pricing of the Storm Recovery Bonds in fact resulted in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order; (b) if retained, the Commission's consultant shall file a certification with the Commission confirming that the structuring, marketing, and pricing of the Storm Recovery Bonds in fact resulted in the lowest Storm Recovery Charges consistent with the market conditions at the time of the Storm Recovery Bonds were priced and the terms set forth in this Financing Order or if the consultant is unable to give such certification it shall fully explain the reasons in a written filing; and (c) the Public Staff's consultant shall file a letter with the Commission stating its opinion as to whether the structuring, marketing, and pricing of the Storm Recovery Bonds and any storm recovery bonds securities in fact resulted in the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order, including an account or any action or inaction that the Public Staff's consultant believes caused the transaction or transactions not to achieve the lowest Storm Recovery Charges consistent with market conditions at the time the Storm Recovery Bonds were priced and the terms set forth in this Financing Order;

**Approval of Regulatory Asset or Regulatory Liability**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;31. That DEC's request to establish a regulatory asset or regulatory liability is approved. Once up-front Financing Costs are known, if actual up-front Financing Costs are in excess of the amounts estimated in the Issuance Advice Letter, DEC shall establish a regulatory asset to defer any excess amounts of up-front Financing Costs and shall preserve those costs to consider for later recovery in DEC's next general rate case. The regulatory asset shall be in an amount equal to the difference between up-front Financing Costs identified in the final Issuance Advice Letter and actual up-front Financing Costs incurred. The regulatory asset shall accrue carrying costs at DEC's net-of-tax WACC. If the actual amount of the up-front Financing Costs are less than the amounts financed by Storm Recovery Bonds, the overcollection will be set aside in a regulatory liability, accruing carrying costs at DEC's net-of-tax WACC and returned to customers in the next general rate case as approved in the Prudency Review Stipulation;

**State Pledge**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;32. That the DEC SPE issuing Storm Recovery Bonds is authorized, pursuant to N.C.G.S. § 62-172(k)(2) and this Financing Order, to include the State of North Carolina pledge, which includes a pledge by the Commission, with respect to Storm Recovery Property and Storm Recovery Bonds and related documentation as provided for in N.C.G.S. § 62-172(k)(1);

**Storm Recovery Bonds Not Public Debt**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;33. That pursuant to N.C.G.S. § 62-172(i) all Storm Recovery Bonds must contain this statement: "Neither the full faith and credit nor the taxing power of the State of North Carolina is pledged to the payment of the principal of, or interest on, this bond"; and

**Irrevocability**

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;34. That upon the earlier of either (a) the transfer of the Storm Recovery Property or (b) issuance of the Storm Recovery Bonds, which shall be substantially simultaneous, this Financing Order shall become irrevocable, and, except for changes made pursuant to the formula-based mechanism authorized in this Financing Order, the Commission may not amend, modify, or terminate this Financing Order by any subsequent action nor reduce, impair, postpone, terminate, or otherwise adjust the Storm Recovery Charges pursuant to this Financing Order.

ISSUED BY ORDER OF THE COMMISSION.

This the 18th day of June, 2025.

---

| |
|:---|
| NORTH CAROLINA UTILITIES COMMISSION |
| /s/ |
| A. Shonta Dunston, Chief Clerk |

---

Commissioner Jeffrey A. Hughes concurs.

**DOCKET NO. E-7, SUB 1325**

**Commissioner Jeffrey A. Hughes concurring:**

While I am willing to approve the Order, I have similar concerns to what I expressed in Docket Nos. E-7, Sub 1321 and E-2, Sub 1362 (Prudency Review Proceeding) and I would have preferred more discussion on the impacts of shifting costs that have been scientifically shown to be linked to past electricity production due to climate change to customers far into the future who may not have even been customers during the storms. I acknowledge that financing through securitization of storm recovery costs over 20 years can be shown to be less expensive than traditional rate recovery of these amounts at higher capital costs with shorter amortization periods. However, I believe a customer paying for this recovery in 20 years will have trouble understanding how they themselves saved costs through securitization. They might reasonably feel that the costs should have been born by past customers whose electricity use can be shown to have contributed to the increase in the severity of storms due to climate change. From a fairness standpoint, there seems to be an argument that I wish was at least acknowledged in the Order, that current customers should carry more responsibility for paying for externalities associated with the current production of electricity.

---

| |
|:---|
| /s/ Jeffrey A. Hughes |
| Commissioner Jeffrey A. Hughes |

---

APPENDIX A

**SUMMARY OF CALCULATION OF DEC'S<br> SECURITIZABLE BALANCE**

---

| | |
|:---|:---|
| Estimated Storm Recovery Costs (incremental O&M costs and capital investments) | $558.88M |
| Estimated Carrying Costs through bond issuance date<sup>1</sup> | $24.65M |
| Estimated up-front Financing Costs<sup>2</sup> | $5.80M |
| Estimated Principal Amount of Storm Recovery Bonds<sup>1</sup> | $589.33M |

---

<sup>1</sup> Assuming the Storm Recovery Bonds are issued on approximately November 1, 2025.

<sup>2</sup> Final Up-front Financing Costs to be included in the Issuance Advice Letter.

APPENDIX B

PAGE 1 OF 2

[Form of Standard True-up Adjustment Letter]

[_____, 20 ]

**<u>VIA ELECTRONIC FILING</u>**

[ ]

Office of the Chief Clerk

North Carolina Utilities Commission

4325 Mail Service Center

Raleigh, North Carolina 27699-4335

---

| | |
|:---|:---|
| **Re:** | **Duke Energy Carolinas, LLC's True-up Adjustment Letter Docket No. E-7, Sub 1325** |

---

Dear Clerk [ ]:

Pursuant to the North Carolina Utilities Commission's (Commission) [ , 20 ] Order in Docket No. E-7, Sub 1325 (the DEC Financing Order), Duke Energy Carolinas, LLC (DEC) as Servicer of the [ ] (Storm Recovery Bonds) has filed a request for an adjustment to the storm recovery bond charges (Storm Recovery Charges). This adjustment is intended to satisfy the requirements of N.C.G.S. § 62-172(b)(3)d., and the Financing Order by ensuring that the Storm Recovery Charges will recover amounts sufficient to timely provide for payments of debt service and other required amounts in connection with the Storm Recovery Bonds.

Per the Financing Order, "[a]fter issuance of Storm Recovery Bonds on behalf of DEC, the servicer will submit at least semiannually (and at least quarterly beginning 12 months prior to the last scheduled final payment date of the last maturing tranche of...Storm Recovery Bonds) a letter in this docket for Commission review, as described in N.C.G.S. § 62-172(b)(3)d., and in the form attached hereto...and as an exhibit to the servicing agreement" (True-up Adjustment Letter). The Storm Recovery Bonds were issued on [ , 20 ]. DEC filed its first True-up Adjustment Letter on [, 20 ].

Ordering Paragraph 23 of the Financing Order describes how such True-up Adjustment Letters are to be handled. Upon the filing of a True-up Adjustment Letter made pursuant to this Financing Order, the Commission shall either administratively approve the requested true-up calculation in writing or inform the servicer of any mathematical or clerical errors in its calculation as expeditiously as possible but no later than 30 days following the servicer's true-up filing; and that notification and correction of any mathematical or clerical errors shall be made so that the true-up is implemented within 30 days of the servicer's filing of a True-up Adjustment Letter. No potential modification to correct an error in a True-up Adjustment Letter shall delay its effective date and any correction or modification which could not be made prior to the effective date shall be made in the next True-up Adjustment Letter. Upon administrative approval or the passage of 30 days without notification of a mathematical or clerical error, no further action of the Commission will be required prior to implementation of the true-up. Attached is the [ TBD ] Revised Sheet No. [ ] reflecting the change in the Storm Recovery Charge.

APPENDIX B

PAGE 2 OF 2

Per DEC's request in its True-up Adjustment Letter and in accordance with the Financing Order, the proposed adjustments to the Storm Recovery Charges will be effective on [ , 20 ].

Respectfully submitted, <br>Duke Energy Carolinas, LLC

Attachments

APPENDIX B

ATTACHMENT 1

**DUKE ENERGY CAROLINAS, LLC**

**Storm Recovery Charge True-up Mechanism Form**

**For the Period ______, 20___ through ______, 20___**

**Storm Recovery Charge True-up Mechanism Form**

**For Storm Recovery Charge to be effective ______**

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| | | | |
|:---|:---|:---|:---|
| **Description** | **Calculation of <br> the True-up (1)** | **Projected Revenue<br> Requirement to be<br> Billed and Collected<br> (2)** | **Revenue<br> Requirement for<br> Storm Recovery<br> Charge<br> (1)+(2)=(3)** |
| **Storm Recovery Bond Repayment Charge (remitted to SPE)** |  |  |  |
| **True-up for the Prior Remittance Period Beginning ______ and Ending ______:** |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing Costs |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other On-Going Costs\* |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Prior Remittance Period Revenue Requirements (Line 4+5+6+7) | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| Prior Remittance Period Actual Cash Receipt Transfers and Interest income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Receipts Transferred to the SPE |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income on Subaccounts at the SPE |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Current Period Actual Daily Cash Receipts Transfers and Interest Income (Line 10+11) | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| (Over)/Under Collections of Prior Remittance Period Requirements (Line 8+12) | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Cash in Excess Funds Subaccount | &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| **Cumulative (Over)/Under Collections through Prior Remittance Period (Line 13+14)** | $**-** |  | $**-** |
| **Current Remittance Period Beginning ______ and Ending ______:** (E) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing Costs |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other On-Going Costs\* |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Current Remittance Period Revenue Requirement (Line 19+20+21+22) | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |  |
| Current Remittance Period Cash Receipt Transfers and Interest Income: |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Cash Receipts Transferred to SPE (A) | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- (B) | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest Income on Subaccounts at SPE (A) | (B) |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;Total Current Remittance Period Cash Receipt Transfers and Interest Income (Line 26+27) | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |
| **Estimated Current Remittance Period (Over)/Under Collection (Line 23+28)** | $**-** | $**-** | $**-** |
| **Projected Remittance Period Beginning ______ and Ending ______:** (E) |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Principal |  | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Interest |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Servicing Costs |  |  |  |
| &nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Other On-Going Costs\* |  |  |  |
| **Projected Remittance Period Revenue Requirement (Line 33+34+35+36)** |  | $**-** | $**-** |
| Total Revenue Requirements (Line 15+29+37) |  |  | $&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;- |
| **Forecasted kWh Sales for the Projected Remittance Period Collections (Adjusted for Uncollectibles)** |  | (C) |  |
| **Average Retail Storm Recovery Charge per kWh to be effective ______ (Line 39/40)** |  | (D) | 0.0000 |

---

---

| |
|:---|
| <u>Notes:</u> |
| (A) Amounts are based on actual collections for ______ through ______. |
| (B) Includes estimated future remittance amounts for ______ through ______. |
| (C) Projected for services rendered ______ through ______. Collections are calculated based upon the ADO and estimated write-offs. |
| (D) Amount will be allocated to each customer class in accordance with allocations approved in last general rate case. |
| (E) Collections are assumed to be on a month lag from service rendered date. |
| <u>\*Other On-going Costs:</u> |
| Pursuant to the Section XX of the Financing Order, the Other On-Going Costs are subject to review. The Other On-Going Costs for the prior remittance period on Line 7, represent actual on-going costs that may be adjusted as needed for any mathematical or clerical errors. The amounts shown for the current and projected remittance period include estimates that will be adjusted for actual costs in future true-up forms. |
| <u>Disputed Other On-Going Costs</u> |
| Only adjustments related to mathematical or clerical errors will be included in the Storm Recovery Charge true-up process. Any Other On-Going costs that are disputed for reasons other than mathematical or clerical accuracy, will not be adjusted through the Storm Recovery Charge true-up process. Disputed costs will be addressed in the Company's next general rate case. The total of disputed Other On-Going Costs to-date, not yet resolved in a general rate case, are _______. |

---

APPENDIX C

PAGE 1 OF 3

**[Form of Issuance Advice Letter]**

[_____, 20 ]

**<u>VIA ELECTRONIC FILING</u>**

[ ]

Office of the Chief Clerk

North Carolina Utilities Commission

4325 Mail Service Center

Raleigh, North Carolina 27699-4335

---

| | |
|:---|:---|
| **Re:** | **Duke Energy Carolinas, LLC's Issuance Advice Letter Docket No. E-7, Sub 1325** |

---

Dear Clerk [ ]:

Pursuant to the Financing Order in the above-captioned docket (Financing Order), Duke Energy Carolinas, LLC (DEC) hereby transmits for filing this combined Issuance Advice Letter and Form of True-up Adjustment Letter. Any terms not defined herein shall have the meanings ascribed thereto in the Financing Order or N.C.G.S. § 62-172.

In the Financing Order, the Commission requires DEC to file an Issuance Advice Letter following pricing of a series of Storm Recovery Bonds.

The terms of pricing and issuance of the first series of Storm Recovery Bonds are as follows:

Name of Storm Recovery Bonds: [ ]

Name of SPE: [ ]

Name of Storm Recovery Bond Trustee: [ ]

Closing Date: [ ]

Expected Bond Ratings<sup>1</sup>: Moody's, [Aaa(sf)]; Standard & Poor's, [AAA(sf)](final ratings to be received prior to closing)

Total Principal Amount of Storm Recovery Bonds to be Issued (i.e., Amount of Storm Recovery Costs and up-front Financing Costs to be financed): $[ ] (*See* Attach. 1)

Estimated up-front Financing Costs: $[ ] (*See* Attach. 2) Interest Rates and Expected Amortization Schedules of the Storm Recovery Bonds (*See* Attach. 3):

Distributions to Investors: Semiannually

Weighted Average Coupon Rate<sup>2</sup>: [ ]%

Annualized Weighted Average Yield<sup>3</sup>: [ ]%

Initial Balance of capital subaccount: $[ ]

<sup>1</sup> DEC anticipates receiving bond ratings from at least two major rating agencies.

<sup>2</sup> Weighted by modified duration and principal amount of each tranche.

<sup>3</sup> Weighted by modified duration and principal amount, calculated including selling commissions.

APPENDIX C

PAGE 2 OF 3

Estimated/Actual Ongoing Financing Costs for first year of Storm Recovery Bonds: $[ ] (*See* Attach. 4)

The Financing Order requires DEC to confirm, using the methodology approved therein, that the actual terms of the Storm Recovery Bonds result in compliance with the Financing Order. DEC certifies that the following are true:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;1. The issuance of Storm Recovery Bonds and imposition and collection of Storm Recovery Charges as authorized
in this Financing Order provide quantifiable benefits to customers as compared to the costs that would have been incurred absent the issuance
of Storm Recovery Bonds;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;2. The aggregate principal amount of Storm Recovery Bonds issued does not exceed the Securitizable Balance;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;3. The Storm Recovery Bonds will be issued in one or more series comprised of one or more tranches having
target final payment of 20 years;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;4. The Storm Recovery Bonds have received a rating of Aaa(sf) / AAA(sf) from at least two of the three major
rating agencies;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;5. The Storm Recovery Bonds are structured to achieve substantially level debt service payments on an annual
basis;

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;6. The issuance of the Storm Recovery Bonds has been structured in accordance with the IRS Revenue Procedure;
and

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;7. The structuring, marketing, and pricing of the Storm Recovery Bonds resulted in the lowest Storm Recovery
Charges consistent with market conditions at the time the Storm Recovery Bonds are priced and the terms set forth in this Financing Order.

The initial storm recovery charge (the "Initial Charge") has been calculated in accordance with the methodology described in the Financing Order and based upon the structuring and pricing terms of the Storm Recovery Bonds set forth in this combined Issuance Advice Letter and Form of True-up Adjustment Letter.

Attachment 5 provides the Revenue Requirements for calculating the Initial Charge. Attachment 6 calculates the Initial Charge based upon the cost allocation formula approved in the Financing Order. Attachment 7 is a comparison between the net present value of costs to customers that are estimated to result from the issuance of Storm Recovery Bonds and the costs that would result from the application of the traditional method of recovering Storm Recovery Costs from customers. Also attached are the calculations and supporting data for such tables. DEC's certification is Attachment 8.

APPENDIX C

PAGE 3 OF 3

Pursuant to the Financing Order, the transaction may proceed and the Initial Charge will take effect unless **a stop order is issued by the Commission prior to noon on [ , 20 ] (3 business days after pricing)**; and the Company, as servicer, or any successor servicer and on behalf of the trustee as assignee of the SPE, is required to apply at least semiannually for mandatory periodic adjustment to the Storm Recovery Charges. The Initial Charge shall remain in effect until changed in accordance with the provisions of Ordering Paragraph 22 of the Financing Order.

DEC's certification required by the Financing Order is set forth in Attachment 8, which also includes the statement of the actions taken by DEC to achieve the Statutory Objectives as required by the Financing Order.

Respectfully submitted, <br>Duke Energy Carolinas, LLC

Attachments

APPENDIX C

ATTACHMENT 1

**TOTAL PRINCIPAL AMOUNT OF STORM RECOVERY BONDS TO BE ISSUED (TOTAL AMOUNT OF STORM RECOVERY COSTS AND UP-FRONT FINANCING COSTS TO BE FINANCED)**

---

| | |
|:---|:---|
| &nbsp;&nbsp; Storm Recovery Costs, including carrying costs through [date of the Prudency Review Order]<br>Carrying costs subsequent to [the date of the Prudency Review Order] to bond issuance date<br>Estimated up-front Financing Costs included in Proposed Structure (refer to attachment 2)<br>| &nbsp;&nbsp; $$|
| &nbsp;&nbsp; **Total Storm Recovery Bond Issuance (rounded up)**<br>| &nbsp;&nbsp; **$**<br>|

---

APPENDIX C

ATTACHMENT 2

**ESTIMATED UP-FRONT FINANCING COSTS**

---

| | |
|:---|:---|
| &nbsp;&nbsp; Underwriters' Fees and Expenses<br>Servicer Set-up Fee<br>Legal Fees<br>Rating Agency Fees<br>Public Staff Financial Advisor Fees<br>Public Staff Legal Fees<br>DEC Structuring Advisor Fee<br>Accounting Fees<br>SEC Fees<br>SPE Set-up Fee<br>Marketing and Miscellaneous Fees and Expenses<br>Printing / Edgarizing Expenses<br>Trustees/Trustees Counsels Fee and Expenses<br>Original Issue Discount<br>Other Ancillary Agreements<br>| &nbsp;&nbsp; $$$$$$$$$$$$$$$|
| &nbsp;&nbsp;**TOTAL ESTIMATED UP-FRONT FINANCING COSTS** | &nbsp;&nbsp;**$** |

---

APPENDIX C

ATTACHMENT 3

PAGE 1 OF 2

**EXPECTED AMORTIZATION SCHEDULE**

**A. General Terms**

---

| | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|
| Tranche | Amount | Coupon | Fixed/ <br> Floating | Average<br> Life | Expected<br> Final <br> Maturity | Legal Final<br> Maturity |

---

**B. Scheduled Amortization Requirement of Storm Recovery Bonds**

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;Series [ ], Tranche [A-1] | &nbsp;&nbsp;Series [ ], Tranche [A-1] | &nbsp;&nbsp;Series [ ], Tranche [A-1] | &nbsp;&nbsp;Series [ ], Tranche [A-1] | &nbsp;&nbsp;Series [ ], Tranche [A-1] | &nbsp;&nbsp;Series [ ], Tranche [A-1] |
| &nbsp;&nbsp;Payment Date | &nbsp;&nbsp;Beginning <br> Principal <br> Balance | &nbsp;&nbsp;Interest | &nbsp;&nbsp;Principal | &nbsp;&nbsp;Total <br> Payment | &nbsp;&nbsp;Ending<br> Principal<br> Balance |

---

&nbsp;&nbsp;Series [ ], Tranche [A-2]<br>

APPENDIX C

ATTACHMENT 3

PAGE 2 OF 2

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;Payment Date | &nbsp;&nbsp;Beginning <br> Principal<br> Balance | &nbsp;&nbsp;Interest | &nbsp;&nbsp;Principal | &nbsp;&nbsp;Total <br> Payment | &nbsp;&nbsp;Ending <br> Principal <br> Balance |

---

---

| | | | | | |
|:---|:---|:---|:---|:---|:---|
| &nbsp;&nbsp;Series [ ], Tranche [A-3] | &nbsp;&nbsp;Series [ ], Tranche [A-3] | &nbsp;&nbsp;Series [ ], Tranche [A-3] | &nbsp;&nbsp;Series [ ], Tranche [A-3] | &nbsp;&nbsp;Series [ ], Tranche [A-3] | &nbsp;&nbsp;Series [ ], Tranche [A-3] |
| &nbsp;&nbsp;Payment<br> Date | &nbsp;&nbsp;Beginning<br> Principal<br> Balance | &nbsp;&nbsp;Interest | &nbsp;&nbsp;Principal | &nbsp;&nbsp;Total <br> Payment | &nbsp;&nbsp;Ending<br> Principal<br> Balance |

---

APPENDIX C

ATTACHMENT 4

**ESTIMATED ANNUAL ONGOING FINANCING COSTS**

---

| | |
|:---|:---|
|  | &nbsp;&nbsp;Annual Amount |
| &nbsp;&nbsp;Servicing Fee<sup>1</sup> | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Return on Invested Capital | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Administration Fee | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Accounting Fees | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Regulatory Assessment Fees | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Legal Fees | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Rating Agency Surveillance Fees | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Trustee Fees | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Independent Manager Fees | &nbsp;&nbsp;$|
| &nbsp;&nbsp;Miscellaneous Fees and Expenses | &nbsp;&nbsp;$|
| &nbsp;&nbsp;**TOTAL ESTIMATED ANNUAL ONGOING FINANCING COSTS** | &nbsp;&nbsp;$|

---

<sup>1</sup> Low end of the range assumes DEC is the servicer (0.05%). Upper end of the range reflects an alternative servicer (0.60%).

APPENDIX C

ATTACHMENT 5

**REVENUE REQUIREMENT AND INPUT VALUES**

---

| | | |
|:---|:---|:---|
| &nbsp;&nbsp;**Initial Payment Period from [ , 20 ] to [ , 20 ]** | &nbsp;&nbsp;**Bond <br> Repayment** | &nbsp;&nbsp;**Total** |
| &nbsp;&nbsp;Forecasted retail kWh sales |  |  |
| &nbsp;&nbsp;Percent of billed amounts expected to be charged- off |  | &nbsp;&nbsp;% |
| &nbsp;&nbsp;Forecasted % of billings paid in the applicable period |  | &nbsp;&nbsp;% |
| &nbsp;&nbsp;Forecasted retail kWh sales billed and collected |  |  |
| &nbsp;&nbsp;Storm Recovery Bond principal payment | &nbsp;&nbsp;$| &nbsp;&nbsp;$|
| &nbsp;&nbsp;Storm Recovery Bond interest payment | &nbsp;&nbsp;$| &nbsp;&nbsp;$|
| &nbsp;&nbsp;Forecasted Ongoing Financing Costs (excluding principal and interest) | &nbsp;&nbsp;$| &nbsp;&nbsp;$|
| &nbsp;&nbsp;Total collection requirement for applicable period | &nbsp;&nbsp;$| &nbsp;&nbsp;$|

---

APPENDIX C

ATTACHMENT 6

**Proposed Storm Recovery Charges by Customer Rate Class**

---

| | | | | |
|:---|:---|:---|:---|:---|
| Rate Class | Applicable Schedules | (A) <br> Revenue <br> Requirement <br> Allocated by Class<sup>(1)</sup> <br> ($'000) | (B)<br> Effective<br> Sales<sup>(2)</sup><br> (MWh)  | (C) <br>Storm<br> Recovery<br> Charge<br> (C/kWh) |
|  |  |  |  | (A) \* 100 / (B) |
| Residential | ES, RE, RETC, RS, RSTC, RT | $46717 | 22608030 | 0.2066 |
| General Service | BC, HP, LGS, HLF, OPT-V, PG, | $15295 | 24142545 | 0.0634 |
|  | S, SGS, SGSTC, TS |  |  |  |
| Industrial | HP, I, HLF, OPT-V, PG | $4547 | 11799958 | 0.0385 |
| Lighting | NL, OL, PL | $3266 | 551032 | 0.5927 |
| Total |  | $69826 | 59101565 | 0.1181 |

---

*<sup>(1)</sup>* *Jiggetts Exhibit 3 - Allocation of Storm Recovery Charge to Customer Classes as filed in Docket No. E-7, Sub 1325. Revenue Requirements were grossed-up to reflect uncollectible account write-offs and regulatory fees.*

*<sup>(2)</sup>* *Effective Sales are based on the Company's 2024 Full retail load forecast for year 2024, adjusted by the weather variance factor. Effective sales have been allocated to Rate Classes using billed MWh sales for year 2024.*

APPENDIX C

ATTACHMENT 7

**Quantifiable Benefits to Customers** 

[To be updated]

[Workpapers to be attached]

APPENDIX C

ATTACHMENT 8

PAGE 1 OF 2

**Form of Company Certification**

[ , 20 ]

[ ]

Chief Clerk

North Carolina Utilities Commission

4325 Mail Service Center

Raleigh, North Carolina 27603-5918

---

| | |
|:---|:---|
| **Re:** | **Duke Energy Carolinas, LLC's Company Certification <br> Docket No. E-7, Sub 1325** |

---

Dear Chief Clerk [ ],

Duke Energy Carolinas, LLC (DEC) submits this Certification pursuant to Ordering Paragraph 29 of the Financing Order in Docket No. E-7, Sub 1325 (the "Financing Order"). All capitalized terms not defined in this letter shall have the meanings ascribed to them in the Financing Order.

In its issuance advice letter dated [ , 20 ], DEC has set forth the following particulars of the Storm Recovery Bonds:

Name of Storm Recovery Bonds: [ ]

Name of SPE: [ ]

Name of Storm Recovery Bond Trustee: [ ]

Closing Date: [ , 20 ]

Expected Bond Ratings<sup>1</sup>: Moody's [Aaa(sf)]; Standard & Poor's [AAA(sf)](final ratings to be received prior to closing)

Total Principal Amount of Storm Recovery Bonds to be Issued: $(*See* Attach. 1)

Estimated up-front Financing Costs: $(*See* Attach. 2)

Interest Rates and Expected Amortization Schedule: (*See* Attach. 3)

Distributions to Investors: Semiannually

Weighted Average Coupon Rate<sup>2</sup>: %

Annualized Weighted Average Yield: %<sup>3</sup>

Initial Balance of capital subaccount: $

Estimated/Actual ongoing Financing Costs for first year of Storm Recovery Bonds:

$[ ]

As required by the Financing Order, DEC prepared a comparison between the net present value of costs to customers that are estimated to result from the issuance of Storm Recovery Bonds and the costs that would result from the application of the traditional method of recovering Storm Recovery Costs from customers.

<sup>1</sup> DEC anticipates receiving bond ratings from at least two major rating agencies.

<sup>2</sup> Weighted by modified duration and principal amount of each tranche.

<sup>3</sup> Weighted by modified duration and principal amount, calculated including selling commissions.

APPENDIX C

ATTACHMENT 8

PAGE 2 OF 2

In accordance with the procedures set forth in the Financing Order, the following actions were taken in connection with the structuring and pricing and Financing Costs of the Storm Recovery Bonds in order to satisfy the statutory cost objectives:

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;· [Formal Steps to be included in final Issuance Advice Letter based on what actions were taken in connection
with the structuring and pricing]

Based on the statutory criteria and procedures, the record in this proceeding, and other provisions of this Financing Order, DEC certifies the statutory requirements for issuance of a Financing Order and Storm Recovery Bonds have been met, specifically that the issuance of the Storm Recovery Bonds on behalf of DEC and the imposition and collecting of Storm Recovery Charges authorized by this Financing Order provide quantifiable benefits to customers of DEC as compared to the costs that would have been incurred absent the issuance of Storm Recovery Bonds and that the structuring and pricing of the Storm Recovery Bonds issued on behalf of DEC result in the lowest Storm Recovery Charges payable by the customers of DEC consistent with market conditions at the time such Storm Recovery Bonds are priced and the terms set forth in the Financing Order.

This certification is being provided to the Commission by DEC in accordance with the terms of the Financing Order, and no one other than the Commission shall be entitled to rely on the certification provided herein for any purpose.

Respectfully Submitted, <br>Duke Energy Carolinas, LLC

## Exhibit 99.3

**Exhibit 99.3**

**Consent of Independent Manager**

Duke Energy Carolinas, LLC and Duke Energy Carolinas NC Storm Funding II LLC are filing a Registration Statement on Form SF-1 (the "Registration Statement") with the Securities and Exchange Commission under the Securities Act of 1933, as amended (the "Securities Act"), in connection with the public offering of storm recovery bonds. In connection therewith, I hereby consent, pursuant to Rule 438 of the Securities Act, to being named as a manager of Duke Energy Carolinas NC Storm Funding II LLC in the Registration Statement, as may be amended from time to time. I also consent to the filing of this consent as an exhibit to such Registration Statement and any amendments thereto.

---

| |
|:---|
| /s/ Bernard J. Angelo |
| Name: Bernard J. Angelo |

---

## Ex-Filing

**Exhibit 107.1**

**Calculation of Filing Fee Table**

**Form SF-1**

(Form Type)

---

| | |
|:---|:---|
| &nbsp;&nbsp;**Duke Energy Carolinas, LLC**<br> (Exact name of registrant, sponsor and depositor as specified in its charter) | &nbsp;&nbsp;**Duke Energy Carolinas NC Storm Funding II LLC** <br> (Exact name of registrant and issuing entity as specified in its charter) |

---

<u>Table 1: Newly Registered Securities</u>

---

| | | | | | | | | |
|:---|:---|:---|:---|:---|:---|:---|:---|:---|
|  | &nbsp;&nbsp;Security Type | &nbsp;&nbsp;Security Class<br> Title | &nbsp;&nbsp;Fee Calculation<br> or Carry<br> Forward Rule | &nbsp;&nbsp;Amount<br> Registered | &nbsp;&nbsp;Proposed<br> Maximum<br> Offering Price<br> Per Unit | &nbsp;&nbsp;Maximum<br> Aggregate<br> Offering Price <br> <sup>(1)</sup> | &nbsp;&nbsp;Fee Rate | &nbsp;&nbsp;Amount of<br> Registration<br> Fee <sup>(1)</sup> |
| &nbsp;&nbsp;Fees to Be Paid | &nbsp;&nbsp;Asset-Backed<br> Securities | &nbsp;&nbsp; Series A Senior<br> Secured Storm<br> Recovery<br> Bonds | &nbsp;&nbsp;457(o) | &nbsp;&nbsp;$1000000 | &nbsp;&nbsp;100% | &nbsp;&nbsp;$1000000 | &nbsp;&nbsp;0.00015310 | &nbsp;&nbsp;$153.10 |
| &nbsp;&nbsp;Total Offering Amount | &nbsp;&nbsp;Total Offering Amount | &nbsp;&nbsp;Total Offering Amount | &nbsp;&nbsp;Total Offering Amount | &nbsp;&nbsp;Total Offering Amount | &nbsp;&nbsp;Total Offering Amount | &nbsp;&nbsp;$1000000 |  | &nbsp;&nbsp;$153.10 |
| &nbsp;&nbsp;Net Fee Due | &nbsp;&nbsp;Net Fee Due | &nbsp;&nbsp;Net Fee Due | &nbsp;&nbsp;Net Fee Due | &nbsp;&nbsp;Net Fee Due | &nbsp;&nbsp;Net Fee Due |  |  | &nbsp;&nbsp;$153.10 |

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&nbsp;&nbsp;&nbsp;&nbsp;(1) Estimated solely for the purpose of calculating the registration fee.