Duke Energy provides an overview of its commercial energy business and the current energy market. Key points discussed include Duke Energy's diverse commercial portfolio, current market fundamentals like declining natural gas and electricity prices, and uncertainties around shale gas production, environmental regulations, and changing consumer behavior. The presentation emphasizes the importance of managing risk through a disciplined hedging process of continually assessing positions, market views, and hedging strategies.

1. Energy Market Update
Duke Energy Retail
June 2013

2. Today’s Discussion
2
 Introduction to Duke Energy’s Commercial Business
 Market fundamentals to watch
 Managing energy risk with uncertainty

3. Duke Energy Commercial Business
3

4. Duke Energy Corporate: scale, diversity, flexibility

5. 5
Duke Energy Commercial Business
Midwest Commercial – operating coal- and
gas-fired generation in PJM and serving load
through retail & wholesale customers
Renewables – investing in highly-contracted
projects with attractive risk-adjusted returns and
growth opportunities
Strategic Initiatives – focused on dynamic
load business strategies
International – highly contracted generation
portfolio with strong cash flow and earnings
diversity
Fuel Type
Natural Gas
Hydro
Wind
Coal / Oil
Solar
Brazil
2,112 MW
Guatemala
283 MW
Ecuador
160 MW
Peru
678 MW
Wind – 735 MW
Argentina
523 MW
El Salvador
296 MW
Midwest Generation
Ohio generation
(~4,000 MW)
Midwest gas-fired generation
(~3,600 MW)
DEI
Latin American assets
National Methanol
Other
Renewables
Wind
Solar
Commercial Transmission
Solar
17 MW

6. Current Market Snapshot
6

7. PJM Energy Prices
$-
$10.00
$20.00
$30.00
$40.00
$50.00
$60.00
$70.00
$80.00
$90.00
Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12
PJM AD-Hub Around the Clock Energy (USD/MWHR)

8. PJM Capacity Prices
2007/08 2008/09 2009/10 2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17
PJMRest of Market $41 $112 $102 $174 $110 $16 $28 $126 $136 $59
FirstEnergy Ohio $355 $114
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
PJM Rest of Market
$/MW-Day

9. Natural Gas Prices
$-
$2
$4
$6
$8
$10
$12
$14
$16
$18
Jul-05 Jul-06 Jul-07 Jul-08 Jul-09 Jul-10 Jul-11 Jul-12
NYMEX:Henry Hub Natural Gas Futures (USD/MMBTU)

10. US Natural Gas Storage
1,000
1,500
2,000
2,500
3,000
3,500
4,000
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52
BCF
Week
US Working Gas in Storage
5-Year Range 5-Year Avage 2012 2013

11. Market Fundamentals To Watch
11

12. 12
0
5
10
15
20
25
30
35
2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030
bcfd
Barnett Fayetteville Woodford Haynesville Marcellus Horn River Montney
Looking Ahead: Shale Gas Production is Now Widely
Viewed as the Growth Engine of Future Supply

13. Looking Ahead: Coal-fired vs. Gas-fired Generation
Battle Continues
13
$(100)
$(50)
$-
$50
$100
$150
$200
1
11
21
31
41
51
61
71
81
91
101
111
121
131
141
151
161
171
$/MW
Renewables Nuclear Controlled Coal Uncontrolled Coal
Combined Cycle NG Simple Cycle NG Fuel Oil Carbon
Illustrative PJM Supply Stack

14. Looking Ahead: Reliability vs. Environmental Regulation vs.
Court Challenges Create Uncertainty
14

15. Looking Ahead: Local vs. Global Commodity Markets
15
Regional Steam Coal Market Integration (2008)
With natural gas prices at $14-18/MMBtu in Asia...Why won’t regional markets integrate?

16. Looking Ahead: Real Cost of Renewable Energy
16
Source: SEIA 2013.
Average Installed Solar PV System Prices

17. Looking Ahead: Load Is Becoming Smarter and Connected
17
Duke Energy Ohio Smart Meter Data – June 5Matt’s Home Thermostat

18. Looking Ahead: Drivers for Consumer Behavior May Not Be
What We Think
Recent Challenge from Duke Energy Retail’s Energy Outlook Portal

19.  Is everyone missing something on shale gas production?
 How much coal-fired generation survives a war of attrition?
 Is nuclear generation faced with a similar future?
 Will markets connect US gas to international demand?
 When will renewable energy survive without incentives?
 Where is baseline demand growth headed?
 How much load will become responsive to market prices?
So What?

20. Managing Risk with Uncertainty
20

21. 21
Retail
Sales
Wholesale
Marketing
Wholesale Energy Markets
Fuel, Emissions & REC Markets
Continually Ask Three Simple Questions
> What is my position?
> What is my view?
> What is my hedging strategy?
Commercial
Load
Commercial
Generation
Portfolio
Optimization
Risk Management Values
 Daily hedging process
 Flatten positions
 Optimize positions separately
 Market values drive decisions
Implications for Generation
 Optimizing make vs. buy decision
 Focused on commodity exposure,
O&M & capital deployment
 Improved co-owner partnership
Implications for Sales
 Hedges retail & wholesale load
through wholesale markets
 Focused on risk-adjusted returns
 Allows flexibility in pricing and
structuring of products/services
Our Active Risk Management Approach

22. Considerations for Retail Energy Risk Mgmt
What is my position?  What is my view?  What is my hedging position?
Energy Supply
Energy Demand
SustainabilityInvestments
Take Aways
 Low wholesale energy & capacity prices
have benefited customers
 Future energy prices are uncertain
 Future capacity prices are higher
 Future value may be driven more from
behaviors
Suggested Action Items
 Be disciplined in your risk management
approach; Keep asking 3 questions
 Think about optimizing your portfolio
 Recognize that changing behaviors will
take time within your organization

23. Managing Commodity Risk
Matthew M. Walz
Vice President of Marketing
Duke Energy Retail
matthew.walz@duke-energy.com
513-287-2165
www.DukeEnergyRetail.com