Ohio Duke Energy Ohio 2012 Electric Security Plan Duke Energy Ohio June 29, 2012 Jim Ziolkowski, Rates Manager

Ohio 2 Agenda  Duke Energy Ohio Electric Security Plan Standard Service Offer (ESP-SSO) and Distribution Rates Overview of ESP Auction Generation Riders Other Items  Transmission (Not Part of ESP) Move to PJM New Riders  Price To Compare

Ohio 3 ELECTRIC SECURITY PLAN OVERVIEW  Duke Energy Ohio filed a 9-year 5-month Electric Security Plan (ESP) in June The previous ESP terminated after December 31,  Settlement was reached in October 2011 with intervening parties.  Hearing held during November  ESP was approved by the PUCO in November  ESP effective January 1, 2012, through May 31, 2015.

Ohio 4 ELECTRIC SECURITY PLAN OVERVIEW  Major rate provisions of the new ESP include: Retail generation Standard Service Offer load to be procured through an auction. The cost of this auction-procured load will be recovered through Riders RC and RE. True-ups addressed through Rider SCR. DE OH will move its legacy generation plants to a non-regulated affiliate by 12/31/14. DE OH will collect $110 million per year for three years through a new non-bypassable charge (Rider ESSC). All previous generation-related charges terminated after December 31, 2011 (base generation, FPP, AAC, SRT, CD, shopping credit).

Ohio AUCTION SCHEDULE 5

Ohio Details of Auction  First auction held on December 14, Three products:  January 2012 – May 2013  January 2012 – May 2014  January 2012 – May 2015  Descending-price clock auction  Charles River Associates was the auction manager. Boston Pacific monitored for the PUCO.  Auction was for capacity and energy.  Blended auction price was $52.68 per MWh for the January 2012 through May 2013 delivery period. 6

Ohio Auction Schedule 7

Ohio 2012 ELECTRIC SECURITY PLAN RATE STRUCTURE AND IMPACTS 8

Ohio 9 GENERATION RATES  The Price To Compare (bypassable) components of the ESP- SSO are: Rider RC (Retail Capacity) Rider RE (Retail Energy) Rider SCR (Supplier Cost Reconciliation) Rider AERR (Alternative Energy Recovery) Rider RECON (Reconciliation Rider) Rider RTO (Regional Transmission Organization)  Other Generation-related riders that are non-bypassable: Rider ESSC (Electric Security Stabilization Charge) Rider LFA (Load Factor Adjustment) Rider UE-GEN* (Uncollectible Expense – Generation) * Bypassable if CRES opts out of PAR

Ohio PTC – AAC Environmental Homeland Security Taxes PTC – AAC Environmental Homeland Security Taxes PTC-FPP Fuel, Purchased Power, Allowances RECs PTC-FPP Fuel, Purchased Power, Allowances RECs Rider TCR MISO Transmission Rider TCR MISO Transmission SRA-SRT System Reliability SRA-SRT System Reliability SRA-CD (Rider SC) Capacity Dedication SRA-CD (Rider SC) Capacity Dedication Distribution rates and riders PTC - BG Base generation PTC - BG Base generation Legend Fully Avoidable Unavoidable Rider RTO Various RTO costs Rider RTO Various RTO costs BTR Base transmission incl. NITS BTR Base transmission incl. NITS Distribution rates and riders SCR Supplier Cost Reconciliation SCR Supplier Cost Reconciliation AERR Alternative Energy Recovery AERR Alternative Energy Recovery RECON Reconciles ESP riders RECON Reconciles ESP riders UE-GEN Generation Uncollectibles UE-GEN Generation Uncollectibles Avoidable with waiver RC and RE Retail Capacity and Energy Derived from auction RC and RE Retail Capacity and Energy Derived from auction RECs 10 Old ESP to 2012 ESP Rate Changes – Non-Residential ESSC Electric Security Stabilization ESSC Electric Security Stabilization LFA Load Factor Adjustment LFA Load Factor Adjustment

Ohio PTC – AAC Environmental Homeland Security Taxes PTC – AAC Environmental Homeland Security Taxes PTC-FPP Fuel, Purchased Power, Allowances RECs PTC-FPP Fuel, Purchased Power, Allowances RECs Rider TCR MISO Transmission Rider TCR MISO Transmission SRA-SRT * System Reliability SRA-SRT * System Reliability SRA-CD Capacity Dedication SRA-CD Capacity Dedication Distribution rates and riders PTC - BG Base generation PTC - BG Base generation Legend Fully Avoidable Unavoidable Rider RTO Various RTO costs Rider RTO Various RTO costs BTR Base transmission incl. NITS BTR Base transmission incl. NITS Distribution rates and riders SCR Supplier Cost Reconciliation SCR Supplier Cost Reconciliation AERR Alternative Energy Recovery AERR Alternative Energy Recovery RECON Reconciles ESP riders RECON Reconciles ESP riders UE-GEN Generation Uncollectibles UE-GEN Generation Uncollectibles Avoidable with waiver RC and RE Retail Capacity and Energy Derived from auction RC and RE Retail Capacity and Energy Derived from auction RECs 11 Old ESP to 2012 ESP Rate Changes – Residential ESSC Electric Security Stabilization ESSC Electric Security Stabilization LFA Load Factor Adjustment LFA Load Factor Adjustment * Conditionally avoidable only for aggregation customers

Ohio 12 RIDER RC (RETAIL CAPACITY)  Based on PJM RPM market capacity price for the delivery period.  Converted into retail rates.  Rider RC will be adjusted before each of the three delivery periods in the ESP.  Rider RC is fully avoidable by shoppers.

Ohio 13 RIDER RE (RETAIL ENERGY)  At the wholesale level, calculated by subtracting the capacity price for the delivery period from the blended auction price.  Converted into retail rates by adjusting for losses, taxes, and seasonality / blocks (for some rates).  Rider RE will be adjusted before each of the three delivery periods in the ESP.  Rider RE is fully avoidable by shoppers.

Ohio 14 RIDER ESSC (ELECTRIC SECURITY STABILIZATION CHARGE)  Collects $110 million per year for three years.  Expires after 12/31/14.  Will be trued up each year.  Rider ESSC is non-bypassable.

Ohio 15 RIDER SCR (SUPPLIER COST RECONCILIATION)  Reconciles the Rider RE and Rider RC revenues received from retail customers with the payments owed to auction providers.  Recovers costs associated with auctions (e.g., consultants, setting up CBP website, etc.)  Will be adjusted quarterly.  Normally bypassable for shopping customers, but Rider SCR contains a non-bypassable provision.

Ohio 16 RIDER SCR (SUPPLIER COST RECONCILIATION) – “Circuit Breaker”  Subject to Commission approval, Rider SCR becomes applicable to all retail jurisdictional customers in the Company’s electric service territory including those customers taking generation service from a CRES provider under the following circumstance: The revenue balance within the SCR account becomes equal to or greater than ten percent of the Company’s total actual SSO revenues collected for the most recent twelve month period under Riders RE, RC, RECON, RTO, and AER-R. The total actual SSO revenue will be determined from data covering the most recent quarter for which it is available. Duke Energy Ohio shall apply to the Commission for confirmation that the Company should modify the Rider such that it becomes non-bypassable regardless as to whether or not the balance in the Rider results from over- or under-recovery.  For customers of CRES providers, Rider SCR will become bypassable again when, at the time of the quarterly filing, the Rider balance of over- or under- recovery falls below the ten percent threshold.

Ohio 17 RIDER AERR (ALTERNATIVE ENERGY RECOVERY RIDER)  Recovers the cost of RECs associated with Standard Service Offer (i.e., non-switched) load.  Will be adjusted quarterly.  Rider AERR is fully avoidable by shoppers.

Ohio 18 RIDER RECON (RECONCILIATION RIDER)  Rider RECON recovers costs necessary to true up revenue collected under Rider PTC-FPP and Rider SRA- SRT with actual costs associated with each of these two riders through December 31,  Rider RECON will terminate when the net over- and/or under-recovery balances for Rider PTC-FPP and Rider SRA-SRT are eliminated but no later than two quarters after the filing of a final entry in the docket initiated by the Commission for purposes of conducting a final audit of Rider PTC-FPP and Rider SRA-SRT.  Rider RECON is fully avoidable by shoppers.

Ohio 19 RIDER UE-GEN (UNCOLLECTIBLE EXPENSE - GENERATION)  Recovers uncollectible accounts expense related to generation service including Percentage of Income Payment (PIPP) customer installments not collected through the Universal Service Fund Rider.  Non-bypassable except it is bypassable for accounts that are not designated for Duke Energy Ohio’s Purchase of Accounts Receivables program.  Will be adjusted annually.

Ohio 20 RIDER LFA (LOAD FACTOR ADJUSTMENT RIDER)  Revenue neutral to Duke Energy Ohio.  Will be adjusted quarterly.  Rider LFA is non-bypassable.  Rider LFA applies to customers taking service under Rates DS, DP, and TS.  Demand charge and kWh credit.

Ohio 21 OTHER ITEMS  Minimum stay rules eliminated for all customer classes.  DE OH received approval to sell its generation plants to a non-regulated affiliate.  Duke Energy Ohio will purchase accounts receivables from CRES providers at zero discount  Rider LM has been re-opened to both shoppers and non-shoppers  Funding provided to various community agencies serving low income customers.  Filed an application in December for a new Distribution Decoupling Rider. Will not apply to DS, DP, and TS.

Ohio 22 TYPICAL BILL IMPACTS – RATE DS

Ohio 23 TYPICAL BILL IMPACTS – RATE DP

Ohio 24 TYPICAL BILL IMPACTS – RATE TS

Ohio Alternative Energy, Energy Efficiency, Peak Demand Reduction  ESP will not impact commitment to meeting alternative energy, energy efficiency, or peak demand reduction requirements.  Duke Energy Ohio currently acquires RECs to meet alternative energy requirements.  Duke Energy Ohio will continue to purchase RECs and also enter contracts to comply with alternative energy requirements.  Duke Energy Ohio will continue energy efficiency and peak demand reduction programs. 25

Ohio 26 ESP TERMINATION  The Electric Security Plan will be effective through May 31,  The Company is required to make its next ESP filing by June 1, 2014.

Ohio TRANSMISSION RIDERS 27

Ohio RTO Membership  Duke Energy Ohio received FERC approval to realign RTO membership with PJM.  Realignment effective January 1,  Auction timeline designed to coordinate with PJM planning year. 28

Ohio 29 Rider BTR and Rider RTO  Rider TCR (Transmission Cost Recovery) terminated after December 31, Rider TCR was bypassable for shoppers.  New transmission riders effective January 1, 2012: Rider BTR (Base Transmission Rider). Non-bypassable, i.e., no longer part of the price to compare. Rider RTO (Regional Transmission Organization Rider). Fully bypassable. Currently zero.

Ohio PTC – AAC Environmental Homeland Security Taxes PTC – AAC Environmental Homeland Security Taxes PTC-FPP Fuel, Purchased Power, Allowances RECs PTC-FPP Fuel, Purchased Power, Allowances RECs Rider TCR MISO Transmission Rider TCR MISO Transmission SRA-SRT System Reliability SRA-SRT System Reliability SRA-CD (Rider SC) Capacity Dedication SRA-CD (Rider SC) Capacity Dedication Distribution rates and riders PTC - BG Base generation PTC - BG Base generation Legend Fully Avoidable Unavoidable Rider RTO Various RTO costs Rider RTO Various RTO costs BTR Base transmission incl. NITS BTR Base transmission incl. NITS Distribution rates and riders SCR Supplier Cost Reconciliation SCR Supplier Cost Reconciliation AERR Alternative Energy Recovery AERR Alternative Energy Recovery RECON Reconciles ESP riders RECON Reconciles ESP riders UE-GEN Generation Uncollectibles UE-GEN Generation Uncollectibles Avoidable with waiver RC and RE Retail Capacity and Energy Derived from auction RC and RE Retail Capacity and Energy Derived from auction RECs 30 Old ESP to 2012 ESP Rate Changes – Non-Residential ESSC Electric Security Stabilization ESSC Electric Security Stabilization LFA Load Factor Adjustment LFA Load Factor Adjustment

Ohio PRICE TO COMPARE

Ohio 32 How Do I Calculate My Price to Compare? Compare: DE OH’s Rider RC Charge + Rider RE Charge + Rider SCR Charge + Rider AERR Charge + Rider RECON Charge + Rider RTO Charge vs. The CRES Provider’s price for electricity Note: Price To Compare varies based on load factor

Ohio 33 Load Factor Load Factor: kWh used during the month divided by hours in the month x monthly demand Impact: > The higher the load factor, the lower the rate per kWh > The lower the load factor, the higher the rate per kWh

Ohio 34 Price To Compare Calculation

Ohio 35 Price To Compare Calculation

Ohio 36 Recommendations Use twelve months of demand and energy to develop an “average annual price to compare” for the best price comparison Compare competing offers using the same usage data

Ohio 37 Annual Price To Compare (Example)

Ohio 38 Duke Energy Ohio Tariffs  DE OH’s tariffs can be found online at:

Ohio 39 DE OH Standard Service Offer Questions?