Business model of Duke Energy

Customer Segments

Duke Energy provides a range of energy-related services, serving various segments of the energy sector. The Company’s customers can be divided by service category:

• Retail Customers, comprising residential customers, commercial businesses, and industrial companies and facilities to which the Company provides utilities; and
• Wholesale Customers, comprising retail energy distributors, energy marketers, local energy transmission companies, independent power producers, energy cooperatives, and municipal bodies to which the Company sells energy in bulk orders or provides transmission services;

Duke Energy primarily serves customers in its native US, with its Regulated Utilities business unit providing utilities to 7.4 million retail electric customers in six states in the Southeast and Midwest regions of the US, including Kentucky, Ohio, and Tennessee. The Company also serves an international client base, primarily comprising customers across Latin America.

Value Propositions

Duke Energy provides value to its customers in the following ways:

• Its industry standing, with the Company established as one of the largest and most reliable regional utility companies in the US, generating revenue in excess of $23 billion;
• Its portfolio of services, with the Company providing a range of services to a broad spectrum of customers across the energy sector, including retail utility services, wholesale energy sales, and other related services;
• Its diversified portfolio of power generation assets, with the Company providing energy generated through a network of power generation facilities of all kinds, including coal, gas and oil, nuclear, hydroelectric and solar plants; and
• Its international reach, with the Company serving a large customer base across a number of US states, as well as international customers, primarily in Latin America, but also across the Middle East, notably in Saudi Arabia;
• Its industry expertise and experience, with the Company employing specialist personnel across each of its operating segments, as well a team of experienced industry executives.

Channels

Duke Energy operates a website at www.duke-energy.com, through which it provides information on its various services, locations, and facilities. The Company does not operate an online sales channel. It does, however, provide an online customer portal, which allows customers to manage the details of their accounts and make payments.

Duke Energy makes its sales through individual sales teams across its operating divisions and segments, which deal directly with customers. The Company operates separate sales and support locations across Ohio, North Carolina, South Carolina, Indian, Tennessee, and Florida, as well as a dedicated international sales unit. The Company also sells energy in bulk through a dedicated wholesale sales team.

Duke Energy operates its own power generation facilities, including solar, hydroelectric, nuclear, coal, and oil and gas plants across the US, Brazil, Chile, Peru, Argentina, Guatemala, Ecuador, and El Salvador. The Company also operates its own transmission infrastructure in its operating jurisdictions.

Customer Relationships

Duke Energy does not make sales to customers on a self-service basis. It does, however, operate an online customer portal that allows the Company’s retail customers to manage their accounts, make payments, and monitor usage without interacting with members of Duke Energy’s sales and support staff. Customers can also request light repairs and manage outage alerts on a self-service basis.

Duke Energy makes sale dedicated sales teams across its various operating units. The Company in particular consults closely with its wholesale customers, with which it seeks to establish long-term business relationships. Large commercial and industrial companies are typically provided their own account management teams.

Duke Energy operates customer support teams across its operating jurisdictions in the US, which can be contacted over the phone or online and are able to provide personalised responses to queries and complaints. The Company also provides a range of online resources, such as guides and FAQs. Additionally, customers are able to interact directly with the Company through its social media accounts, including with Facebook, Twitter, LinkedIn, YouTube.

Key Activities

Duke Energy is an energy company. It organises its activities into three reportable business segments: Regulated Utilities, which conducts retail energy production and distribution operations through Duke Energy Carolinas, Duke Energy Progress, Duke Energy Florida, Duke Energy Indiana and Duke Energy Ohio; International Energy, which operates and manages power generation facilities and engages in sales and marketing of electric power, natural gas, and natural gas liquids outside the US; and Commercial Portfolio, which acquires, builds, develops and operates wind and solar renewable generation and energy transmission projects.

Duke Energy provides retail utilities to residential, commercial, and industrial customers, and provides wholesale energy services to energy distribution companies and energy cooperatives.

Key Partners

Duke Energy works closely with a broad range of companies and organisations across its three operating segments. These partners include:

• Supplier and Vendor Partners, comprising suppliers of raw materials and equipment used in the Company’s power generation activities, as well as suppliers of services, tools, and technologies that are utilised more broadly across the enterprise;
• Development and Real Estate Partners, comprising builders, developers, and contractors that work with the Company on developing its own power assets, as well as working together more general on development and construction projects outside of the energy sector;
• Asset Recovery and Recycling Partners, comprising a range of companies and organisations that work with the Company on its asset recovery and recycling projects, including the reselling, scrapping, recycling, or disposing of end-of-life assets; and
• Commercial and Trade Partners, comprising a range of commercial entities that collaborate with the Company as part of its energy efficiency incentive program.

Duke Energy has recently launched a number of partnerships. This includes a tie-up with Green Charge Networks to develop behind-the-meter energy storage solutions, and a partnership with Duke University to develop a cleaner and more efficient source of power for the Duke University community.

Key Resources

Duke Energy’s key resources raw materials and supply chain, its power generation assets, its distribution and transmission infrastructure, its IT and communications infrastructure, its sales and marketing channels, its partnerships, and its personnel.

Duke Energy owns and or leases a number of properties that are key to the success of its operations. This notably includes the Company’s network of numerous nuclear, fossil fuel, and renewable energy power plants across the US and Latin America – including in Brazil, Chile, Peru, Argentina, Guatemala, Ecuador, and El Salvador. The Company also operates an extensive network of electric transmission lines, overhead and underground electric distribution lines, gas mains, and gas service lines that distribute both its own product and that of certain customers.

Cost Structure

Duke Energy incurs costs in relation to the procurement of raw materials and supplies, the purchasing of energy from third parties, the operation and maintenance of its power generation and distribution infrastructure, the maintenance of its IT and communications infrastructure, the operation of its sales and marketing channels, the management of its partnerships, and the retention of its personnel.

In 2015 Duke Energy recorded total operating costs of $16.7 billion. This included fuel and purchased power costs in the amount of $7.66 billion, operation and maintenance costs of $5.87 billion, and property and other tax costs totalling $1.14 billion. The Company’s cost of natural gas for the year was $195 million.

Revenue Streams

Duke Energy generates primarily revenue through the production and sale of energy on the retail and wholesale markets. The Company also derives a portion of its revenue from the provision of other energy-related services, including the distribution of power and gas from third parties through its proprietary distribution lines.

In 2015 Duke Energy generated total operating revenue for the year in the amount of $23.46 billion, down slightly on the $23.93 billion recorded by the Company the previous year. The majority of the Company’s revenue is generated from its regulated electric activities, which alone recorded annual revenue of $21.38 billion.