Ohio

Duke Energy Ohio 2012 Electric Security Plan

Duke Energy Ohio June 29, 2012 Jim Ziolkowski, Rates Manager

Agenda

   Duke Energy Ohio Electric Security Plan Standard Service Offer (ESP-SSO) and Distribution Rates  Overview of ESP    Auction Generation Riders Other Items Transmission (Not Part of ESP)   Move to PJM New Riders Price To Compare

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ELECTRIC SECURITY PLAN OVERVIEW



Ohio

Duke Energy Ohio filed a 9-year 5-month Electric Security Plan (ESP) in June 2011. The previous ESP terminated after December 31, 2011.

 Settlement was reached in October 2011 with intervening parties.

 Hearing held during November 2011.

 ESP was approved by the PUCO in November 2011.

 ESP effective January 1, 2012, through May 31, 2015.

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ELECTRIC SECURITY PLAN OVERVIEW

     Major rate provisions of the new ESP include: Retail generation Standard Service Offer load to be procured through an auction. The cost of this auction-procured load will be recovered through Riders RC and RE. True-ups addressed through Rider SCR.

DE OH will move its legacy generation plants to a non-regulated affiliate by 12/31/14.

DE OH will collect $110 million per year for three years through a new non-bypassable charge (Rider ESSC).

All previous generation-related charges terminated after December 31, 2011 (base generation, FPP, AAC, SRT, CD, shopping credit).

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AUCTION SCHEDULE

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Details of Auction

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     First auction held on December 14, 2011.

 Three products:    January 2012 – May 2013 January 2012 – May 2014 January 2012 – May 2015 Descending-price clock auction Charles River Associates was the auction manager. Boston Pacific monitored for the PUCO.

Auction was for capacity and energy.

Blended auction price was $52.68 per MWh for the January 2012 through May 2013 delivery period.

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Auction Schedule

ESP Period 3 years and 5 months Auction Date

Auction 1 Dec 2011

Tranches

33 33 34 Auction 2 May 2012 17 Auction 3 Nov 2012 16 17 Auction 4 May 2013 16 Auction 5 Nov 2013

TOTAL TRANCHES Delivery Period Beginning 1/1/2012 - 17 months 6/1/2013

33 33 34 33 34

6/1/2014

34 100 17 16 100 17 16 17 16 100

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2012 ELECTRIC SECURITY PLAN RATE STRUCTURE AND IMPACTS

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GENERATION RATES - 2012



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The Price To Compare (bypassable) components of the ESP SSO are:       Rider RC (Retail Capacity) Rider RE (Retail Energy) Rider SCR (Supplier Cost Reconciliation) Rider AERR (Alternative Energy Recovery) Rider RECON (Reconciliation Rider) Rider RTO (Regional Transmission Organization)  Other Generation-related riders that are non-bypassable:    Rider ESSC (Electric Security Stabilization Charge) Rider LFA (Load Factor Adjustment) Rider UE-GEN* (Uncollectible Expense – Generation) * Bypassable if CRES opts out of PAR 9

Old ESP to 2012 ESP Rate Changes – Non-Residential PTC - BG •Base generation PTC – AAC •Environmental •Homeland Security •Taxes PTC-FPP •Fuel, Purchased Power, Allowances •RECs SRA-SRT •System Reliability SRA-CD (Rider SC) •Capacity Dedication Rider TCR •MISO Transmission Distribution rates and riders RECs Legend Fully Avoidable Avoidable with waiver Unavoidable

Ohio

RC and RE •Retail Capacity and Energy •Derived from auction SCR •Supplier Cost Reconciliation AERR •Alternative Energy Recovery RECON Reconciles ESP riders Rider RTO •Various RTO costs BTR •Base transmission incl. NITS ESSC •Electric Security Stabilization UE-GEN Generation Uncollectibles LFA •Load Factor Adjustment Distribution rates and riders 10

Old ESP to 2012 ESP Rate Changes – Residential PTC - BG •Base generation PTC – AAC •Environmental •Homeland Security •Taxes PTC-FPP •Fuel, Purchased Power, Allowances •RECs SRA-SRT * •System Reliability SRA-CD Capacity Dedication Rider TCR •MISO Transmission Distribution rates and riders * Conditionally avoidable only for aggregation customers RECs Legend Fully Avoidable Avoidable with waiver Unavoidable

Ohio

RC and RE •Retail Capacity and Energy •Derived from auction SCR •Supplier Cost Reconciliation AERR •Alternative Energy Recovery RECON Reconciles ESP riders Rider RTO •Various RTO costs BTR •Base transmission incl. NITS ESSC •Electric Security Stabilization UE-GEN Generation Uncollectibles LFA •Load Factor Adjustment Distribution rates and riders 11

RIDER RC (RETAIL CAPACITY)

Ohio

 Based on PJM RPM market capacity price for the delivery period.

 Converted into retail rates.

 Rider RC will be adjusted before each of the three delivery periods in the ESP.

 Rider RC is fully avoidable by shoppers.

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RIDER RE (RETAIL ENERGY)

Ohio

 At the wholesale level, calculated by subtracting the capacity price for the delivery period from the blended auction price.

 Converted into retail rates by adjusting for losses, taxes, and seasonality / blocks (for some rates).

 Rider RE will be adjusted before each of the three delivery periods in the ESP.

 Rider RE is fully avoidable by shoppers.

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RIDER ESSC (ELECTRIC SECURITY STABILIZATION CHARGE)  Collects $110 million per year for three years.

 Expires after 12/31/14.

 Will be trued up each year.

 Rider ESSC is non-bypassable.

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RIDER SCR (SUPPLIER COST RECONCILIATION) 

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Reconciles the Rider RE and Rider RC revenues received from retail customers with the payments owed to auction providers.

 Recovers costs associated with auctions (e.g., consultants, setting up CBP website, etc.)  Will be adjusted quarterly.

 Normally bypassable for shopping customers, but Rider SCR contains a non-bypassable provision.

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RIDER SCR (SUPPLIER COST RECONCILIATION) – “Circuit Breaker”  

Ohio

Subject to Commission approval, Rider SCR becomes applicable to all retail jurisdictional customers in the Company’s electric service territory including those customers taking generation service from a CRES provider under the following circumstance:   The revenue balance within the SCR account becomes equal to or greater than ten percent of the Company’s total actual SSO revenues collected for the most recent twelve month period under Riders RE, RC, RECON, RTO, and AER-R. The total actual SSO revenue will be determined from data covering the most recent quarter for which it is available.

Duke Energy Ohio shall apply to the Commission for confirmation that the Company should modify the Rider such that it becomes non-bypassable regardless as to whether or not the balance in the Rider results from over- or under-recovery.

For customers of CRES providers, Rider SCR will become bypassable again when, at the time of the quarterly filing, the Rider balance of over- or under recovery falls below the ten percent threshold.

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RIDER AERR (ALTERNATIVE ENERGY RECOVERY RIDER)  Recovers the cost of RECs associated with Standard Service Offer (i.e., non-switched) load.

 Will be adjusted quarterly.

 Rider AERR is fully avoidable by shoppers.

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RIDER RECON (RECONCILIATION RIDER)

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   Rider RECON recovers costs necessary to true up revenue collected under Rider PTC-FPP and Rider SRA SRT with actual costs associated with each of these two riders through December 31, 2011.

Rider RECON will terminate when the net over- and/or under-recovery balances for Rider PTC-FPP and Rider SRA-SRT are eliminated but no later than two quarters after the filing of a final entry in the docket initiated by the Commission for purposes of conducting a final audit of Rider PTC-FPP and Rider SRA-SRT.

Rider RECON is fully avoidable by shoppers.

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RIDER UE-GEN (UNCOLLECTIBLE EXPENSE - GENERATION)  Recovers uncollectible accounts expense related to generation service including Percentage of Income Payment (PIPP) customer installments not collected through the Universal Service Fund Rider.

Ohio

 Non-bypassable except it is bypassable for accounts that are not designated for Duke Energy Ohio’s Purchase of Accounts Receivables program.

 Will be adjusted annually.

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RIDER LFA (LOAD FACTOR ADJUSTMENT RIDER)  Revenue neutral to Duke Energy Ohio.

 Will be adjusted quarterly.

 Rider LFA is non-bypassable.

 Rider LFA applies to customers taking service under Rates DS, DP, and TS.

 Demand charge and kWh credit.

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OTHER ITEMS

     

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Minimum stay rules eliminated for all customer classes.

DE OH received approval to sell its generation plants to a non-regulated affiliate.

Duke Energy Ohio will purchase accounts receivables from CRES providers at zero discount Rider LM has been re-opened to both shoppers and non-shoppers Funding provided to various community agencies serving low income customers.

Filed an application in December for a new Distribution Decoupling Rider. Will not apply to DS, DP, and TS.

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TYPICAL BILL IMPACTS – RATE DS

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LINE NO.

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 200 300 400 200 300 400 200 267 400 200 300 400 500 300 400 200 300 500

HOURS RATE CODE DS LEVEL of DEMAND (KW)

30 30 30 50 50 50 75 75 75 100 100 100 100 300 300 500 500

LEVEL of USE (KWH)

6,000 9,000 12,000 10,000 15,000 20,000 15,000 20,000 30,000 20,000 30,000 40,000 50,000 90,000 120,000 100,000 150,000 500,000

Dec-11 NON-SHOP ($) $909 1,087 1,221 1,487 1,784 2,007 2,209 2,506 2,989 2,931 3,525 3,972 4,418 10,489 11,829 14,481 17,453 43,797 ESSC+ RC+LFA

$198 148 89 330 247 149 495 412 223 660 494 297 101 1,482 892 3,299 2,469 1,011

Retail Prices for Jan 2012-May 2013 RE Bypassable Total Bill SSO Customer Difference from 2011 SSO $ %

$316

$741

-$168 -19% 474 632 526 790 1,053 790 1,053 1,579

$854 $959 $1,206 $1,395 $1,570 $1,788 $1,977 $2,333

(233) (263) (281) (388) (438) (421) (529) (656) -21% -21% -19% -22% -22% -19% -21% -22% 1,053 1,579 2,106 2,632 4,738 6,317 5,264 7,896 26,321

$2,369 $2,748 $3,096 $3,445 $8,159 $9,204 $11,675 $13,569 $34,062

(561) (777) (875) (973) (2,331) (2,625) (2,807) (3,884) (9,734) -19% -22% -22% -22% -22% -22% -19% -22% -22% NOTES: EXISTING GENERATION RATE IS COMPRISED OF BASE GEN, FPP, AAC, SRT, AND CD.

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TYPICAL BILL IMPACTS – RATE DP

Ohio

LINE NO.

HOURS RATE CODE

144 288 432 144 288 432 144 288 432 144 288 432 144 288 432 144 288 432 144 288 432 144 288 432 8 9 10 11 4 5 6 7 1 2 3 20 21 22 23 24 12 13 14 15 16 17 18 19

DP LEVEL of DEMAND (KW)

100 100 100 200 200 200 300 300 300 500 500 500 800 800 800

LEVEL of USE Dec-11 NON-SHOP (KWH)

14,400 28,800 43,200 28,800 57,600 86,400 43,200 86,400 129,600 72,000 144,000 216,000 115,200 230,400 345,600 144,000 288,000 432,000 216,000 432,000 648,000 432,000 864,000 1,296,000

($) $2,631 3,505 4,196 5,058 6,808 8,190 7,486 10,111 12,183 12,341 16,716 20,170 19,625 26,623 32,150 24,480 33,229 40,137 35,572 48,695 59,058 68,848 95,094 115,820 ESSC+ RC+LFA

$787 563 294 1,573 1,126 589 2,360 1,689 883 3,933 2,814 1,472 6,293 4,503 2,356 7,866 5,629 2,945 11,577 8,221 4,195 22,710 15,997 7,946

Retail Prices for Jan 2012-May 2013 RE Bypassable Total Bill SSO Customer Difference from 2011 SSO $ %

$758 1,516 2,274

$2,280 $2,841 $3,357

($350) (665) (839) -13% -19% -20% 1,516 3,032 4,548 2,274 4,548 6,822 3,790 7,580

$4,357 $5,479 $6,511 $6,435 $8,117 $9,665 $10,589 $13,392

(701) (1,329) (1,679) (1,051) (1,994) (2,518) (1,752) (3,323) -14% -20% -21% -14% -20% -21% -14% -20% 11,371 6,064 12,129 18,193 7,580 15,161 22,741 11,371 22,741 34,112 22,741 45,483 68,224

$15,973 $16,821 $21,306 $25,434 $20,975 $26,582 $31,742 $31,140 $39,550 $47,290 $61,632 $78,452 $93,933

(4,197) (2,804) (5,317) (6,716) (3,505) (6,647) (8,395) (4,433) (9,145) (11,768) (7,216) (16,642) (21,887) -21% -14% -20% -21% -14% -20% -21% -12% -19% -20% -10% -18% -19% 23

TYPICAL BILL IMPACTS – RATE TS

Ohio

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

LINE NO.

200 400 200 400 200 400 200 400 600 200 400 520 535 681 400 600 500 600

HOURS RATE CODE TS LEVEL of DEMAND (KVA)

1,000 1,000 2,500 2,500 5,000 5,000 10,000 10,000 10,000 20,000 20,000 25,061 29,866 38,553 80,000 80,000 100,000 200,000

LEVEL of USE (KWH)

200,000 400,000 500,000 1,000,000 1,000,000 2,000,000 2,000,000 4,000,000 6,000,000 4,000,000 8,000,000 13,043,867 15,964,371 26,253,097 32,000,000 48,000,000 50,000,000 120,000,000

Dec-11 NON-SHOP ($) $23,399 32,261 58,195 80,350 116,188 160,499 232,175 320,797 405,999 464,149 641,393 932,279 1,128,863 1,697,645 2,467,613 3,149,229 3,469,911 7,629,381 ESSC+ RC+LFA

$6,728 2,947 16,819 7,367 33,638 14,735 67,276 29,470 (9,345) 134,551 58,940 15,255 10,037 (96,603) 215,602 (94,916) 67,029 (287,685)

Retail Prices for Jan 2012-May 2013 RE Bypassable Total Bill SSO Customer Difference from 2011 SSO $ %

$10,167 20,335 25,418 50,836 50,836 101,673 101,673 203,346

$18,412 $24,818 $45,728 $61,744 $91,254 $123,287 $182,308 $246,373

($4,987) (7,442) (12,467) (18,606) (24,934) (37,212) (49,867) (74,424) -21% -23% -21% -23% -21% -23% -21% -23% 305,018 203,346 406,691 663,103 811,571 1,334,613 1,626,765 2,440,148 2,541,821 6,100,370

$309,429 $364,414 $492,544 $712,330 $862,096 $1,290,775 $1,949,416 $2,453,865 $2,743,601 $6,083,966

(96,570) (99,735) (148,849) (219,949) (266,767) (406,869) (518,197) (695,364) (726,310) (1,545,415) -24% -21% -23% -24% -24% -24% -21% -22% -21% -20% 24

Alternative Energy, Energy Efficiency, Peak Demand Reduction    

Ohio

ESP will not impact commitment to meeting alternative energy, energy efficiency, or peak demand reduction requirements.

Duke Energy Ohio currently acquires RECs to meet alternative energy requirements.

Duke Energy Ohio will continue to purchase RECs and also enter contracts to comply with alternative energy requirements.

Duke Energy Ohio will continue energy efficiency and peak demand reduction programs.

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ESP TERMINATION

Ohio

 The Electric Security Plan will be effective through May 31, 2015.

 The Company is required to make its next ESP filing by June 1, 2014.

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TRANSMISSION RIDERS

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RTO Membership

Ohio

 Duke Energy Ohio received FERC approval to realign RTO membership with PJM.

 Realignment effective January 1, 2012.

 Auction timeline designed to coordinate with PJM planning year.

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Rider BTR and Rider RTO

Ohio

 Rider TCR (Transmission Cost Recovery) terminated after December 31, 2011. Rider TCR was bypassable for shoppers.

 New transmission riders effective January 1, 2012:  Rider BTR (Base Transmission Rider). Non-bypassable, i.e., no longer part of the price to compare.

 Rider RTO (Regional Transmission Organization Rider). Fully bypassable. Currently zero.

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Old ESP to 2012 ESP Rate Changes – Non-Residential PTC - BG •Base generation PTC – AAC •Environmental •Homeland Security •Taxes PTC-FPP •Fuel, Purchased Power, Allowances •RECs SRA-SRT •System Reliability SRA-CD (Rider SC) •Capacity Dedication Rider TCR •MISO Transmission Distribution rates and riders RECs Legend Fully Avoidable Avoidable with waiver Unavoidable

Ohio

RC and RE •Retail Capacity and Energy •Derived from auction SCR •Supplier Cost Reconciliation AERR •Alternative Energy Recovery RECON Reconciles ESP riders Rider RTO •Various RTO costs BTR •Base transmission incl. NITS ESSC •Electric Security Stabilization UE-GEN Generation Uncollectibles LFA •Load Factor Adjustment Distribution rates and riders 30

PRICE TO COMPARE 2012

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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 RECON Charge + Rider RTO Charge vs.

The CRES Provider’s price for electricity

Note: Price To Compare varies based on load factor

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Load Factor

Load Factor: kWh used during the month divided by hours in the month x monthly demand Impact: > The higher the load factor, the lower the rate per kWh > The lower the load factor, the higher the rate per kWh

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Price To Compare Calculation

High Load Factor

Rate DP Rider RC Rider RE Rider SCR Rider AERR Rider RECON Rider RTO Total Billing kWh Price To Compare (¢ per kWh)

Ohio

72% kWh kW 518,400 1,000 $ 1,649.53

27,289.61

201.14

$ 29,140.28

518,400 5.6212

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Price To Compare Calculation

Low Load Factor

Rate DP Rider RC Rider RE Rider SCR Rider AERR Rider RECON Rider RTO Total Billing kWh Price To Compare (¢ per kWh)

Ohio

21% kWh kW 518,400 3,456 $ 3,551.22

27,289.61

201.14

$ 31,041.97

518,400 5.9880

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Recommendations

Ohio

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 36

Annual Price To Compare (Example)

Ohio

kW

1,000 1,240 1,450 1,850 2,200 2,850 3,458 3,512 1,888 1,450 1,100 1,098

kWh

518,665 625,120 650,000 689,000 750,000 812,000 518,000 822,000 651,030 525,012 518,665 612,000 7,691,492

Load Factor

72.0% 70.0% 62.3% 51.7% 47.3% 39.6% 20.8% 32.5% 47.9% 50.3% 65.5% 77.4%

AERR, RTO, RECON, SCR

201.24

242.55

252.20

267.33

291.00

315.06

200.98

318.94

252.60

203.70

201.24

237.46

2,984.30

RC, RE

28,953.31

34,896.63

36,448.24

38,955.23

42,585.26

46,528.18

30,820.23

47,509.96

36,965.95

29,767.88

29,058.94

34,045.39

436,535.19

Total

29,154.55

35,139.17

36,700.44

39,222.56

42,876.26

46,843.24

31,021.22

47,828.90

37,218.55

29,971.58

29,260.18

34,282.85

439,519.48

Price To Compare (¢)

5.62

5.62

5.65

5.69

5.72

5.77

5.99

5.82

5.72

5.71

5.64

5.60

5.71

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Duke Energy Ohio Tariffs



DE OH’s tariffs can be found online at: www.duke-energy.com

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DE OH Standard Service Offer

Questions?

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