U. S. CLIMATE CHANGE LEGISLATION

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

2. 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

3. ELECTRIC SECTOR ALLOWANCE ALLOCATION CRITICAL TO CONSUMER PRICE PROTECTION H.R. 2454 Allocation Provisions • 2012 Allocation Equal to About 85% of Sector’s 2005 CO2 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

4. DUKE ENERGY POSITION ON H.R. 2454 • 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

5. 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. 2454

6. DUKE ENERGY POSITION ON S. 1733 • 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

7. 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…