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Delivering Affordable Energy

Duke Energy currently offers some of the most competitive electric rates in the United States. However, our power plants are aging, as is our transmission and distribution system.

Modernizing our system will enable us to provide cleaner and more reliable energy. As we continue to invest in modernization, customers’ rates will increase. We intend to file for base-rate increases in the Carolinas and possibly Kentucky in 2011. If approved, we anticipate the new rates going into effect in 2012.

We minimize rate increases by aggressively managing our costs, and reduce rate impacts by developing new programs and services to help our customers reduce their energy usage.

Ohio Customer Choice

Since 2001, Ohio’s evolving competitive electricity market has given customers the ability to choose their supplier for power generation and transmission. This is different from the traditional regulated markets of the Carolinas, Indiana and Kentucky, where customers are served by the electric utility assigned to their area.

Duke Energy Ohio’s current rates were approved by the Public Utilities Commission of Ohio (PUCO) in 2008 and set through the end of 2011 as part of our existing Electric Security Plan (ESP). The ESP set a fixed regulated rate for electric generation that was comparable to the then-current market price.

Customer choice wasn’t significantly embraced in Ohio until 2009 when power prices plummeted, along with the economy and industrial demand. Competitive retail electric service providers began marketing directly to Duke Energy Ohio customers, offering generation prices lower than our ESP rate. Many large commercial and industrial customers began to switch to other suppliers to take advantage of the price differential. Because of the structure of Ohio’s electric market, Duke Energy Ohio was no longer able to offer them competitive pricing.

Duke Energy’s regulated Average Retail Rates
Source: Edison Electric Institute Typical Bills and Average Rates Report, Summer 2010; 12 months ending 6/30/2010
To respond to the competitive market, in 2009 Duke Energy Retail, a nonregulated subsidiary of Duke Energy Corp., began to market to large commercial and industrial customers in Ohio. In mid-2010, we began marketing to residential customers as well.

By the end of 2010, about 65 percent of Duke Energy Ohio’s customer load had switched to other retail suppliers who offered generation at lower prices. Duke Energy Retail was able to recover approximately 60 percent of that switched load, while also capturing customer load outside our franchised service area. Duke Energy Ohio continues to serve as its customers’ power distribution provider, regardless of which entity they choose for their electric generation.

Late last year, we applied to move toward market-driven rates. The proposed change would have ensured that Duke Energy Ohio customers receive a competitive, reliable supply of electric generation. However, the PUCO did not approve our market-rate application as filed. In light of this ruling, we are evaluating our options and plan to file a revised application.