Charlotte Chamber U. S. CLIMATE CHANGE LEGISLATION Mike Stroben November 11, 2009

DUKE ENERGY POSITION ON CLIMATE CHANGE LEGISLATION  Duke Energy Supports the Enactment of Economically and Environmentally Sustainable Federal Climate Change Cap – and - Trade Legislation  Economic Sustainability Includes Provide Adequate Consumer Price Protection  The Question of Whether GHG Regulation Is Coming Is Settled  EPA is moving to regulate – set to do so in March of 2010  Duke Energy Prefers a Legislative Approach  EPA lacks the legislative authority to craft an environmentally sound program that protects the economy and consumers  A program that can have such broad economic implications for the country’s economy should be the responsibility of an elected and accountable Congress 2

ELECTRIC SECTOR ALLOWANCE ALLOCATION CRITICAL TO CONSUMER PRICE PROTECTION H.R Allocation Provisions  2012 Allocation Equal to About 85% of Sector’s 2005 CO 2 Emissions  Local Distribution Company Allocation Is Split 50/50 Between Emissions and Retail Sales  Duke Energy Carolina Customers Fare Relatively Well Under This Allocation Formula Because of Nuclear Generation  Value of Allowance Allocation Must Flow Back to Customers  Allocation Phases Out Entirely In 2030  Allocation Much Improved From Where Debate Began – Full Auction 3

DUKE ENERGY POSITION ON H.R  A Step in the Right Direction But it Can Be Improved  As the legislative process moves forward in the Senate Duke Energy will work to win improvements to the legislation to benefit our customers  Implementation schedule and cap trajectory  Size of electric sector allocation and phase-out schedule  Cost-containment mechanisms  Price collar  Offsets  Exemption from EPA regulation  Support for deployment of new nuclear units 4

MOVING FORWARD IN THE SENATE  Senate Environment and Public Works Committee Reported Out a Bill Last Week  Republicans boycotted the process  Senate EPW bill dead on arrival  Senate leadership will craft a bill for floor consideration  Senate Finance Committee Will Work on Allowance Allocations  Floor Action Won’t Occur Until 2010  Health care  Finance reform  Expect Any Bill Passed By the Senate to Be More Favorable to Consumers Than H.R

DUKE ENERGY POSITION ON S  A Step in the Wrong Direction – Must Be Improved  Allocation to Electric Sector Reduced  Inadequate Exemption from EPA Regulation  Nothing for New Nuclear Unit Deployment 6

EPA WILL REGULATE GREENHOUSE GAS EMISSIONS UNLESS  Supreme Court Ruled In April 2007 That EPA Has the Authority to Regulate GHG Emissions Under the Clean Air Act  EPA Now Using That Authority  EPA Proposed a Rule to Regulate GHG Emissions From New Motor Vehicles – Plans On Finalizing By March 31, 2010  Once finalized the door is open for EPA to regulate other sources  Automatically triggers Prevention of Significant Deterioration permitting requirements for major stationary sources of GHG emissions  EPA proposed a rule to reduce the number of sources subject to PSD but… 7