Customer Case Studies Market Based Energy Efficiency

MME/DOE Industrial Energy Efficiency Conference Rio de Janeiro, Brazil – Aug. 10, 2011

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FACTS ABOUT DUKE ENERGY 150+ years of service 4 million customers Fortune 500 $57+ billion in assets Stock dividends for 80+ years Traded on NYSE as DUK Dow Jones Sustainability Index

OUR ASPIRATIONS Decarbonize our power generation Help make our communities the most energy efficient in the world

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“These aspirations are grounded in our commitments to provide our customers with clean, affordable and reliable electric and gas services.”

Jim RogersChairman, President and CEO

HOW WE WILL ACHIEVE OUR ASPIRATIONS Build new, more efficient generation and retire older, coal-fired units Make energy efficiency the “fifth fuel” by implementing our save-a-watt

model in each of our jurisdictions Modernize our grid by replacing less efficient analog technology with

advanced digital technology

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CLIFFSIDE PLANT CONSTRUCTION

WATER HEATER BLANKET

INTELLIGENT SWITCH

THE BUSINESSES WE’RE IN

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Regulated generation, electric and gas

transmission and distribution systems

Duke Energy CarolinasDuke Energy Ohio

Duke Energy KentuckyDuke Energy Indiana

U.S. Franchised Electric & Gas

U.S. Franchised Electric & Gas

Commercial Power

Commercial Power

Duke Energy InternationalDuke Energy International

Unregulated generation

Primarily Latin American assets

Duke Energy Generation Services

(DEGS) andDuke Energy Retail

U.S. FRANCHISED ELECTRIC AND GAS

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5 states: North Carolina, South Carolina, Indiana, Ohio and Kentucky

50,000 square miles of service area

27,000 MW of regulated generating capacity

4.0 million retail electric customers

500,000 retail gas customers

U.S. FRANCHISED ELECTRIC AND GAS – NEW BASELOAD GENERATION

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Cliffside Unit 6 – North Carolina 825-MW advanced coal unit Upon completion in 2012, will

replace 1,000 MW of older coal units

State-of-the-art emissions controls

Edwardsport – Indiana 630-MW integrated gasification

combined-cycle (IGCC) unit Upon completion in 2012, will

replace 160 MW of older coal units Potential for carbon capture

and storage

NEW NUCLEAR GENERATION

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Catawba

Lee

McGuire

Oconee

We operate three nuclear stationsin the Carolinas

We are the nation’s third-largest nuclear plant operator

The Lee Nuclear Station could come on line in the 2021 time frame

U.S. FRANCHISED ELECTRIC AND GAS – RENEWABLE GENERATION

Wind Generation Buying 100 MW of wind capacity from

Indiana’s first commercial wind farm

Solar Power Installing solar panels to create an

8-MW generation network inNorth Carolina

Buying 4 MW of electricity from independently owned North Carolina solar farm – the state’s largest at16 MW when completed

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ENERGY EFFICIENCY

Duke Energy is committed to helping customers save power and money through energy efficiency

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SMART GRID

Building a smarter power grid is an essential part of Duke Energy’s effort to provide customers with affordable, reliable and increasingly clean energy.

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COMMERCIAL POWER

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MIDWEST GENERATION Approx. 7,550 net MW of

unregulated generation Over 50% of generation is

dedicated to Ohio customersDEGS Manages approximately 5,800

MW of power generation at 20 facilities throughout the U.S.

Responsible for renewable energy investments

Working to build commercial transmission capacity

MIDWEST GENERATION Approx. 7,550 net MW of

unregulated generation Over 50% of generation is

dedicated to Ohio customersDEGS Manages approximately 5,800

MW of power generation at 20 facilities throughout the U.S.

Responsible for renewable energy investments

Working to build commercial transmission capacity

COMMERCIAL POWER – RENEWABLE GENERATION

WIND GENERATION DEGS has 735 MW of wind power in

commercial operation

SOLAR DEGS entered commercial solar power

business in early 2010

BIOMASS DEGS with AREVA formed ADAGE

– a joint venture that will develop green biopower energy solutions for customersin the United States

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DUKE ENERGY INTERNATIONAL

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Approx. 4,000 MW of generating capacity

6 countries: Argentina, Brazil, Ecuador,El Salvador, Guatemalaand Peru

4th largest generator inLatin America(based on net capacity)

Approx. 4,000 MW of generating capacity

6 countries: Argentina, Brazil, Ecuador,El Salvador, Guatemalaand Peru

4th largest generator inLatin America(based on net capacity)

OUR COMMITMENT TO THE ENVIRONMENT

Pollution control Community programs Address climate change

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COMMITTED TO SUSTAINABILITY At Duke Energy, sustainability means doing business in a way that is good

for people, the planet and profits

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Partly Cloudy With a Chance of Rain Forest

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Scientific field research builds upon legacy of environmental stewardship at Duke Energy

8/5/2011 Six Duke Energy employees recently completed a week-

long scientific expedition to the Rio Cachoeira Nature Reserve in Paraná, Brazil, to assist with research on the impact of climate change on the Atlantic Rain Forest.

Two employees from the U.S. and four Duke Energy International employees from Latin America were selected to participate. This environmental education pilot project was sponsored by Duke Energy’s Energy and Environmental Policy department in partnership with the Earthwatch Institute, a non-profit conservation organization.

Partly Cloudy With a Chance of Rain Forest

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Legacy of Environmental StewardshipThe purpose of this pilot project is to provide Duke Energy with insight into the impacts of climate change globally

and to understand how employee education and engagement on environmental issues can benefit the company. The environmental stewardship strategy mirrors Duke’s energy and environmental policy efforts, which are focused on securing certainty for our customers in a carbon-constrained future.

“In a world where increasing environmental regulation is anticipated, we need to take a long-term view on the impact of climate on our business,” said John Stowell, vice president, Energy and Environmental Policy. “Pilots such as the Brazilian expedition help employees experience firsthand how the issue is relevant to our company, our shareholders and our customers.”

About the ExpeditionThe Atlantic Rain Forest is one of the most endangered tropical forests in the world, offering a unique opportunity for

study. The landscape includes new and old growth in low-level and elevated terrain. Scientists have long known that forests have tremendous potential to hold carbon in trees and soils. Duke Energy employees helped scientists better understand the pressures on forests by engaging in data collection and field research.

“Since the time of colonization, the Atlantic Rain Forest had been deforested by 93 percent. Due to reforestation efforts, it has since risen to 11 percent of forested growth,” said Kris Knudsen, EHS environmental specialist, who took part in the research. “Each day we’d walk several kilometers to the laboratory or up into the forest. Experiments included taking measurements on hundreds of trees, analyzing when trees produce fruit, weighing bee hives to determine honey production, collecting leaves and flowers, and measuring and weighing dried vegetation that had previously been harvested. We also took the opportunity to plant new trees.”

“This is the second time that Duke has participated in an Earthwatch expedition,” said Stowell. “In 2008, four employees ventured to Iceland, studying potential effects of climate change on glacier lands. Expeditions like the one in Brazil are one way for employees to engage directly in stewardship activities on the international level and form perspectives that they can then use to help Duke achieve sustainability at home.”

The team not only contributed to the science of climate study; but formed closer working relationships with employees across our company. For additional information and photos of the work by the Brazilian team, view the slide presentation(PDF) (photos courtesy of Kris Knudsen).

Energy Efficiency Plan

What is Duke Energy’s Energy Efficiency Plan? Duke Energy is committed to finding new ways to help your business address rising

energy costs with environmentally sound, low-cost options. Our Energy Efficiency Plan is a new regulatory approach to energy efficiency. The plan supports the development of energy efficiency conservation programs to help our customers save money and energy. By using less energy, we can help keep energy rates lower and reduce the need to build additional power plants.

Features & Benefits Provides all customers with new Energy Efficiency programs, including energy

assessments and incentive rebates, making access to energy-saving equipment easy and affordable.

Reduces electricity consumption, helping Duke Energy avoid building new generation facilities.

Represents an important departure from traditional energy efficiency regulatory models where utilities are compensated based on how much they spend rather than the results they produce. Under the plan, Duke Energy will only be paid for verified energy reductions.

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Energy Efficiency Plan

How It Works Duke Energy will assist customers in “saving watts” rather than relying solely on

building new power plants to meet energy demands. Duke Energy will provide all customers with energy efficiency programs to help them

conserve energy. After four years, the energy efficiency programs are projected to displace the need for

1,700 megawatts (MW) of capacity, or about 745,000 megawatt hours. As the results from new energy efficiency programs are realized, the company will retire older coal plants, significantly reducing emissions. This MW reduction lessens the need for new power generation and helps keeps rates lower.

The cost associated with implementation of our Energy Efficiency Plan will be shared among all customers. Through active participation in these program offerings some large business customers could see up to a 15 percent reduction in their electric bills.

Some Duke Energy industrial customers and qualifying large commercial customers in can “opt out” of the program if they’ve developed their own energy efficiency programs or intend to do so in the near term.

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CONSERVATION AND DEMAND RESPONSE PROGRAMSLarge Business Energy Assessments

Program offers three levels of Assessments: On-line, Off-Site, On-site

Smart $aver Nonresidential Incentive Program - Prescriptive

Program offers defined incentives to nonresidential electric customers to help offsetincremental cost differences between standard and high-efficiency equipment

Smart $aver Nonresidential Incentive Program - Custom

Program offers customers financial assistance for projects involving more complicated or alternative technologies, or those measures which are not covered by other prescriptive incentive offerings. Available to all assigned customers, not just schools

PowerShare

Program offers customer incentives for providing capacity in emergency and economic constrained times

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DEVELOPING A SUSTAINABLE ENERGY PLAN How can I improve my company’s energy efficiency?

Develop a sustainable energy plan (SEP) A critical step for success

Make sure you understand the “who” and “what” of the plan

– Who will champion the plan and make implementation decisions?

– What financial criteria will be used to evaluate opportunities?

– Attend our SEP workshops, offered twice annually in your state/region

Establish benchmarks and goals based on current performance Benchmark metrics can be total energy or based on unit of production, square footage, per

student or employee, etc.

Energy reduction goals – both short-term and long-term objectives

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SMART $AVER ENERGY ASSESSMENTS Energy Assessments Offerings

On-line assessment – free Available through the Business Services Newsline Tools You Can Use

– Benchmark data by business segment– C&I energy efficiency recommendations by end use and segment– Facility Assessment Wizard

The Facility Assessment Wizard provides recommendations tailored to your business or industry

Recommendations address lighting, HVAC, energy management systems, boilers, process heating and cooling, etc.

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SMART $AVER ENERGY ASSESSMENTS Energy Assessment Offerings (cont.)

Off-site assessment – no charge for customers who have not opted out An off-site assessment is a conference call with the customer to help you identify energy-

consuming equipment and energy efficiency opportunities The customer is provided a worksheet questionnaire for collecting facility information A phone-based interview, typically one to two hours, is conducted with the customer by an

assessor At the conclusion of the interview, the customer, assessor and Duke Energy decide if an on-

site assessment is warranted If not, the assessor prepares a report and reviews the recommendations with the customer

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SMART $AVER ENERGY ASSESSMENTS Energy Assessment Offerings (cont.)

On-Site Assessment – Available to customers who have not opted out – $3,000 for a one-day on-site analysis and report

– $600 per additional day on-site The on-site assessment follows the phone-based, off-site assessment. Additional data is gathered, and measurements are taken during the on-site work The assessor compiles the report and submits to Duke Energy for review The report is presented to the customer for review, and a live meeting or face-to-face

meeting is scheduled to step through the results Customers can recover their portion of the costs dollar-for-dollar when they use Smart

$aver incentives (i.e., for every dollar of incentive they are eligible for, they will receive two dollars up to the cost of the assessment).

Note: Customer costs are based on Duke Energy paying for approximately 50% of the total cost – varies but

approximately $6,000 plus $1,200 per additional day.

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SMART $AVER ENERGY ASSESSMENTS What is included in the On-Site assessment report?

The report includes an extensive executive summary of recommendations and supporting information, including: Energy conservation measures – describes each opportunity Implementation costs – estimates equipment and labor requirements Annual energy savings – estimates project’s utility bill savings Smart $aver incentives – Prescriptive and Custom Incentives Financial metric – simple payback or internal rate of return

The report will also identify demand response opportunities and savings from participating in PowerShare® if applicable.

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SMART $AVER™ INCENTIVE PROGRAM Offers incentives to Duke Energy nonresidential electric customers to

help offset the incremental cost differences between standard and high-efficiency equipment Incentives typically do not exceed 50% of the incremental cost difference

Helps move the market to more efficient equipment Increased demand results in lower costs as retailers and distributors stock more

energy efficient equipment

Two Programs: Prescriptive and Custom Smart $aver Prescriptive includes incentives for standard high efficiency

equipment (motors, pumps, HVAC, lighting, etc.) Smart $aver Custom provides incentives for high efficiency equipment not

addressed through the prescriptive program

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PRESCRIPTIVE PROGRAM Five groupings of equipment types

1. Lighting2. HVAC (cooling)

■ Includes thermal storage, chillers 3. Motors / pumps / variable frequency drives4. Foodservices equipment 5. Processes

Roll out portfolio of approximately125 measures

Equipment eligibility can be found on each application

Frequently Asked Questions and more details can be found at www.duke-energy.com.

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SMART $AVER CUSTOM INCENTIVES What are Custom Incentives and why do we offer them?

Smart $aver Custom Incentives offers incentives for energy efficiency measures not addressed by the Prescriptive Incentives

Proposed energy efficiency measures may be eligible for a Custom Incentive if they reduce electrical demand (kW) and/or save electrical energy (kWh)

Custom Incentives are offered to ensure all cost-effective efficiency measures are addressed by our incentive program and give our customers more opporutnities to implement these measures

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SMART $AVER CUSTOM INCENTIVES What are examples of Custom Incentive applications?

Nonprescriptive lighting measures such as reflectors Thermal improvements to the building envelope: roof and wall insulations,

upgrades to windows and doors, etc. On-demand ventilation systems Energy management systems HVAC tune-up initiatives Energy recovery systems Energy-saving process upgrades Retro-commissioning of existing buildings Compressed Air Systems

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POWERSHARE®

PowerShare® is Duke Energy’s brand name for commercial and industrial Demand Response programs.

What exactly is Demand Response?“Changes in electric usage by end-use customers from their normal consumption patterns in response to changes in the price of electricity over time, or to incentive payments designed to induce lower electricity use at times of high wholesale market prices or when system reliability is jeopardized.”

Federal Energy Regulatory Commission

Demand Response offers customers an incentive to curtail energy load during periods of high demand.

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Why do we offer Demand Response programs? Can be counted towards Reserve Margin requirements. Reduces need to build plants or

purchase capacity in the marketplace. Example 1:

Projected System Load: 10,000 MW Reserve Margin requirement: 15 % Total Capacity Requirement: 11,500 MW Less: Available Generation: 10,000 MW Required Market Capacity Purchases: 1,500 MW

Example 2: Projected System Load: 10,000 MW Reserve Margin requirement: 15 % Total Capacity Requirement: 11,500 MW Less: Available Generation: 10,000 MW Less: PowerShare: 100 MW Required Market Capacity Purchases: 1,400 MW

(Assuming market capacity price of $25/kW – savings to company from avoided capacity purchases = $2,500,000!)

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Why do we offer Demand Response programs? (cont.) For the effect on system peak and improved reliability:

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Duke Energy MW Load Profile PowershareEvent Days(8/8/07 & 8/9/07)

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What options are available? PowerShare Mandatory

30 minutes advance notice of event 100 hours per year maximum interruption 10 hours per day max 10 interruptions per year max Capacity Credit - $3.50/kW-month ($42/kW-yr) Energy Credit - $0.10/kWh Non-Compliance Penalty - $2/kWh

PowerShare Generator 30 minutes advance notice of event 100 hours per year maximum interruption 10 hours per day max 10 interruptions per year max Capacity Credit - $3.50/kW-month ($42/kW-yr) Energy Credit - $0.10/kWh Non-Compliance Penalty - $2/kWh

PowerShare Voluntary Hourly event prices are posted

the day of an event Customers have the right, but

not the obligation to participate There are no penalties for

nonperformance Customers get paid for results

as long as they provide at least 50% of what they nominate

Can be combined with PowerShare Mandatory

Simple example of energy efficiency impact to a 5 MW facility

Potential Energy Efficiency Projects Convert T-12 Lighting to T-8 Replace Standard Motors with Premium Efficiency Motors Install Control System Take advantage of new PowerShare offer

Average Peak kW 5,000Average Load Factor 80%Annual kWh 34,560,000Annual Bill $1,728,000Average Rate $0.05

Bill Assumptions

Why should I not opt out of energy efficiency?

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ENERGY EFFICIENCY BILL IMPACT (cont.)

Smart $aver incentives and PowerShare demand response programs create significant additional value (4%-22%) for very little cost.

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ENERGY EFFICIENCY BILL IMPACT

Do Nothing

Participate

10 Year NPV Bill Savings ($1000s)

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Benefit to Duke Energy DETERMINATION OF ENERGY EFFICIENCY RIDER ADJUSTMENT

Energy Efficiency Adjustments (EEA) will be applied to the energy (kilowatt hours) billed of all rate schedules for each vintage as determined by the following formula: SAW Non-residential Adjustment = Non-residential Avoided Cost Revenue Requirement +

Non-residential Lost Revenues / Forecasted Non-residential kWh Sales (excluding opt out sales) for the Rider billing period

Where Non-residential Avoided Cost Revenue Requirement = (Non-residential Demand Side

Management Program Avoided Cost Revenue Requirement X 75%) + (Non-residential Energy Efficiency Program Avoided Cost Revenue Requirement X 55%)

Participation true-ups: After the first year, the Rider will include a true-up of previous Rider amounts billed to reflect actual customer participation in the programs.

Measurement and verification true-up: EM&V activities and results will be included in a mid-term EM&V-based true-up process that will be reflected in Vintage Year 3 Rider EE collections. A final EM&V true-up reflected in Vintage Year 6 Rider EE collections will incorporate all EM&V studies completed since the mid-term EM&V true-up. EM&V results will include measure-level savings adjustments and net-to-gross analysis. In addition, the mid-term and final true-ups will incorporate the most recent EM&V results in the avoided cost true-up, the lost revenue true-up, and the earnings cap true-up.

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Benefit to Duke Energy Shareholders Earnings cap true-up: In the sixth year a true up will be billed, if applicable,

to refund amounts collected through the Rider in excess of the earnings cap, in accordance with the following levels of achievement and allowed return on investment. Percentage Actual Return on Investment Cap Target Achievement on Program Costs Percentage

>=90% 15% 80% to 89% 12% 60% to 79% 9% < 60% 5%

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Case Studies in Industrial EE Hickory Chair

https://my.duke-energy.com/portal/server.pt/gateway/PTARGS_0_0_853_827_1044_43/http%3B/Mydukecontent.duke-energy.com/duke/collateral/case-studies/110156-hickory-chair-case-FINAL.pdf

IBM – Research Triangle https://my.duke-energy.com/portal/server.pt/gateway/

PTARGS_0_0_853_827_1044_43/http%3B/mydukecontent.duke-energy.com/duke/collateral/case-studies/100225-ibm-case-study-draft1.pdf

Kimberly-Clark https://my.duke-energy.com/portal/server.pt/gateway/

PTARGS_0_0_853_827_1044_43/http%3B/mydukecontent.duke-energy.com/duke/collateral/case-studies/kimberly-clark.pdf

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Tactic Description Target Segments Target Contact Sales Strategy

E3 – Energy, Environment and Economy (Lean) Tri-assessment program. -2011 Goal: SC – 5 to 10 NC – 15 to 17OH/KY – 5 – 10IN - TBD

Enterprise Solution:-Federally supported and partially funded simultaneous assessment for Energy Efficiency, Waste Minimization and Lean Manufacturing. - Unique customer value proposition drives prescriptive and custom energy measures as a part of a holistic sustainability approach

-Manufacturing including supply chain leveraging of large OEMs into small and medium sized businesses.

-Energy/Engineering manager-Sustainability/HSE Manager/Director-Plant manager-Supply Chain Manager/Director- Government and community leaders

-Lead with State MEP organizations targeting community wide launches.-Provide Duke account management support into potential client identification and qualification.

Blueprint for Energy Savings 2011 Goal: 25 - New Webinar Participants6 - Energy plans developed.

Enterprise Solution:Sustainable Energy Management Plan development:-Two 6 hour webinars and two follow-up progress report-out sessions.- 5 to 10 Targeted single client Energy Plan Drafting Workshops

Manufacturing -Energy/Engineering manager-Sustainability/HSE Manager/Director-Supply Chain Manager/Director

-Lead Web-based E-blasts and promotion via account managers during customer Business Planning sessions

Targeted High Yield Energy Efficiency-2011 Goal

Collect 100% of top 100 customer data and 50% of all LB Manufacturing Customer data

Conduct 6 webinars with minimum of 15 participants each

Enterprise Solution:-Through Customer Business Planning Process collect and populate Salesforce database with key data on high energy demand industrial systems- Mine Data to identify prospective high value targets for Smart$aver incentives including but not limited to Compressed Air Systems, Lighting, VFD’s, Chillers & HVAC

Manufacturing -Energy/Engineering manager-Sustainability/HSE Manager/Director-Supply Chain Manager/Director

-Lead with Web-based E-blasts and promotion via account managers during customer Business Planning sessions-Offer Targeted Webinars and connection with trade allays through trade associations such as AEE, ASHRAE, SEEA etc.