Rates Update – September 18, 2015 Jim Ziolkowski, Director, Rates and Regulatory Planning

Agenda  Overview of ESP Application  SSO Supply and Pricing  Distribution Investment and Other Provisions  Price To Compare 2

Overview  On April 2, 2015 the PUCO approved Duke Energy Ohio’s Electric Security Plan for a term of three years that:  Continues the current auction process for procuring supply for non-shopping load;  Addresses rate design issues for Riders RC and RE;  Includes provisions for improving reliability through a more aggressive capital expenditure program;  ESP effective June 1, 2015 through May 31,

SSO Supply  Auction follows same format as in previous ESP ( i.e., descending clock).  Delivery periods and auctions staggered.  At least two auctions for each delivery period.  Charles River & Associates to manage auction process.  Excludes procurement of RECs to comply with renewable energy standards.  Full-requirements, load following for 100% of SSO or non-shopping load.  First set of auctions were held on May 14,  Continuation of Supplier Cost Reconciliation Rider (Rider SCR) to true-up SSO revenue with SSO supply costs. 4

5 Auction Schedule – June 2015 through May 2018 Duke Energy Ohio, Inc. Competitive Bid Process Schedule AuctionProduct Auction 1 12 Month 1 June 2015 thru May Month June 2015 thru May Month June 2015 thru May Auction 2 24 Month 2 June 2016 thru May Auction 3 24 Month 3 June 2016 thru May Auction 4 12 Month 4 June 2017 thru May Auction 5 12 Month 5 June 2017 thru May Total # Tranches 100

SSO Pricing  Modified rate design on revenue neutral basis.  Simplified SSO rates and modify to more closely resemble market rates.  Eliminate demand charges for generation under all rate schedules so that all SSO generation rates are “energy-based,” mirroring what competitive retail electric suppliers typically offer shopping customers. 6

SSO Pricing Example - Eliminate Rider RC Demand Charges (Rate DS) 7 These are example rates. Actual Rider RC rates based on May 2015 auctions appear in the Company’s tariff.

Distribution Service  Distribution Capital Investment Rider (Rider DCI)  Rider DCI provides for Duke Energy to implement a reliability improvement program through more aggressive investment in our distribution system.  Recovery of incremental capital spend over amounts currently in rates.  Quarterly update filings and subject to annual audit by PUCO Staff.  Modeled after similar riders approved for the FirstEnergy operating companies and for AEP Ohio.  Rider DCI will not recover any costs associated with Grid Modernization as long as such costs are being recovered in a separate rider.  Distribution Storm Recovery Rider (Rider DSR)  Tracks storm costs above/below baseline amount from rate case.  Cost recovery begins if accumulated “above baseline” exceeds $5 million; otherwise, factor “above/below baseline” into next rate case. 8

Other Provisions  Load Factor Adjustment  Rider LFA will continue, but it will be reduced by 33 percent in the first year, 33 percent in the second year, and 34 percent in the third year. Effective June 2015, the credit is $ per kWh (periodically trued-up).  Large Customer Interruptible Load Program  Will continue through the term of the ESP.  Costs will continue to be recovered through Rider DR-ECF. 9

10 New Riders Table 1 – New Riders Rider Name TariffNote Distribution Capital Improvement Rider Rider DCIReturn, depreciation, property taxes on incremental distribution rate base Distribution Storm Rider Rider DSRTracks storm costs above or below base amount in last distribution rate case.

11 Riders Being Eliminated Table 2 –Riders Being Eliminated Rider Name Tariff Note Electric Security and Stabilization Rider Rider ESSCExpired on January 1, 2015 Save-A-Watt Rider Rider SAWReplaced by Rider EE/PDR Save-A-Watt Rider Rate Rider SAW-RReplaced by Rider EE/PDR Fuel and Reserve Capacity Reconciliation Rider Rider RECONDiscontinued as part of order in Case No EL-AIR, et al. Emergency Electrical Procedures for Long Term Fuel Shortages Rider EEPFObsolete PIPP Customer Discount Expires on May 31, 2015 Energy Efficiency Revolving Loan Program Rider EERTerminated December 31, 2010

12 Riders Continuing With Modifications Table 3 –Riders Continuing with Modifications Rider Name TariffNote Retail Capacity Rider Rider RCEliminate demand charges so that all SSO rates are energy-based Retail Energy Rider Rider REMigrate toward uniform rates for all residential customers. Net Metering Rider Rider NMAdding text that clarifies billing determinants. Load Factor Adjustment Rider Rider LFAPhase-out beginning June 1, 2015

13 Riders Continuing Without Modifications Table 4 –Riders Continuing with No Modifications Rider Name TariffNote Supplier Cost Reconciliation Rider Rider SCRTrues up SSO revenue with invoiced cost from suppliers and recovers auction-related costs. Base Transmission Rider Rider BTRRecovers non-market based transmission costs Alternative Energy Recovery Rider Rider AER-RRecovers cost of REC purchases to comply with alternative energy standards Distribution Decoupling Rider Rider DDRTrues up weather-normalized base distribution revenue for customers not billed based on demand Uncollectible Expense Riders Rider UE-GEN, UE-DRecovers bad debt charges related to generation and distribution services SmartGrid Rider Rider DR-IMRecovers incremental costs related to SmartGrid deployment Regional Transmission Organization Rider Rider RTOCurrently zero. Economic Competitiveness Fund Rider Rider ECFRecovers cost of large customer interruptible program.

Switching Statistics and Price To Compare June

15 Duke Energy Ohio Switching Statistics – Month Ending June 30, 2015 Residential MWh Commercial MWh Industrial MWh Total MWh Duke Energy Ohio 272,94392,53421,521392,735 CRES Providers 302,063468,474422,0271,309,358 Total Sales575,006561,008443,5481,702,093 EDU Share47.47%16.49%4.85%23.07% Electric Choice Switch Rate 52.53%83.51%95.15%76.93% Source: PUCO Summary of Switch Rates from EDUs to CRES Providers in Terms of Sales

Legend Fully Bypassable Non-Bypassable 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 (RECs) Alternative Energy Recovery AERR (RECs) Alternative Energy Recovery UE-GEN Generation Uncollectibles UE-GEN Generation Uncollectibles RC and RE Retail Capacity and Energy Derived from auction RC and RE Retail Capacity and Energy Derived from auction 16 Electric Security Plan Rate Structure LFA Load Factor Adjustment LFA Load Factor Adjustment 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 (RECs) Alternative Energy Recovery AERR (RECs) Alternative Energy Recovery UE-GEN Generation Uncollectibles UE-GEN Generation Uncollectibles RC and RE Retail Capacity and Energy Derived from auction RC and RE Retail Capacity and Energy Derived from auction DCI Distribution Capital Investmt DCI Distribution Capital Investmt Current Proposed DSR Distribution Storm Rider DSR Distribution Storm Rider LFA Load Factor Adjustment LFA Load Factor Adjustment

17 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 RTO Charge vs. The CRES Provider’s price for electricity Note: Price To Compare varies based on load factor

18 Price To Compare Calculation

19 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

20 Annual Price To Compare (Example)

21 Duke Energy Ohio Tariffs  Duke Energy Ohio’s tariffs can be found online at:

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