U.S.U.S. UtilityUtility PerspectivePerspective onon NuclearNuclear EnergyEnergy

Seminar Nuclear Energy in Chile

July 8, 2008

DavidDavid JonesJones Director, Nuclear Policy & Strategy

1 Topics

ƒ Overview of Duke Energy & Duke’s Nuclear Operations ƒ What Does it Mean to be a Nuclear Plant Owner/Operator? ƒ U.S. Nuclear Industry Performance ƒ Expansion of Nuclear Generation ƒ Expanding the Duke Energy Nuclear Fleet ƒ What is Driving the Renewed Interest in Nuclear? ƒ Key Issues for New Nuclear Plants

2 Duke Energy

ƒ A Fortune 500 company ƒ Traded on the NYSE as DUK ƒ Assets of $50 billion in 2008 ƒ Approximately 17,800 employees ƒ 40,000 megawatts total generating capacity in North & South America ƒ Provide electric service to ~3.9 million customers in Carolinas, Ohio, Kentucky and Indiana ƒ Over 100 years of energy expertise

3 North America Generation

4 South & Central America Generation

Brazil Peru & 2,307 MW Ecuador 870 MW

Central Argentina America 576 MW 605 MW

5 Duke Energy Carolinas—Service Territory

VA

NC

SC Duke Power GA Generation Facilities (22,000 sq. miles)

Charlotte

Nuclear Facilities Fossil Facilities Hydro Facilities Combustion Turbine

6 Nuclear Fleet Overview

McGuire Nuclear Duke Energy’s Nuclear Fleet Station • Seven nuclear units • 6,996 megawatts of capacity • ~50 percent of DE-Carolinas generation Oconee Nuclear Station Catawba Nuclear Station

Oconee Nuclear Station • Reactor type: pressurized water • Number of units: 3 • Station capacity: 2,538 megawatts • Located on Lake Keowee in Oconee County, South Carolina • Began generating electricity in 1973 •2nd U.S. nuclear station to have its license renewed 7 Nuclear Fleet Overview

McGuire Nuclear Station • Reactor type: pressurized water • Number of units: 2 • Station capacity: 2,200 megawatts • Located on Lake Norman in Mecklenburg County, North Carolina • Began generating electricity in 1981 Catawba Nuclear Station • Reactor type: pressurized water • Number of units: 2 • Station capacity: 2,258 megawatts • Located on Lake Wylie in York County, South Carolina • Began generating electricity in 1985 • Jointly owned* *Catawba co-owners: North Carolina Municipal Power Agency Number One, North Carolina Electric Membership Corporation, Piedmont Municipal Power Agency, Duke Energy and Saluda River Electric Cooperative Inc. 8 What Does it Mean to be a Nuclear Plant Owner/Operator?

ƒ Openness and Transparency ƒ Internal and External Oversight ƒ Nuclear Safety Culture

9 We Are Only as Strong As Our Weakest Link

ƒ We are each others keepers—if one fails we all fail ƒ Training classes ƒ Audits ƒ Partnerships ƒ Self critical nature combined with external oversight ƒ Procedure use and adherence ƒ Questioning attitude

10 External Oversight & Review

11 Safety Culture—What is it?

Safety Culture ƒ An organization’s values, behaviors—modeled by its leaders and internalized by its members—that serve to make nuclear safety an overriding priority

ƒ Culture is for the group what character and personality are for the individual

12 Principles for Nuclear Safety Culture ƒ Leaders demonstrate commitment to safety ƒ Everyone is personally responsible for nuclear safety ƒ Trust permeates the organization ƒ Decision-making reflects safety first ƒ A questioning attitude is cultivated ƒ Organizational learning is embraced ƒ Nuclear safety undergoes constant examination 13 U.S. Nuclear Industry Performance Then and Now: The Biggest Differences

ƒ The 1970s and 1980s ƒ Cost overruns, schedule delays The industry ƒ Capacity factors in mid-50% range operating to ƒ Refueling outages 100-plus days today’s high ƒ Indestructible attitude—so much safety margin standards is ƒ Today the industry ƒ Major overhauls, plant restarts on time, on budget that will build ƒ Capacity factors in the 90% range new nuclear ƒ Refueling outages 20-30 days ƒ Self-critical attitude—maximizing safety margin plants

14 U.S. Electricity Production Costs 1995-2007, In 2007 cents per kilowatt-hour

12.0 2007 Coal - 2.47 10.0 Gas - 6.78 Nuclear - 1.76 Petroleum - 10.26 8.0

6.0

4.0

2.0

0.0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 Fuel as a Percentage of Electric Power Production Costs – 2007

4% 7% 11% Fuel 26% 26% Fuel 77% Fuel 92% O&M 74% 52%

O&M 23% O&M, 8% Coal Gas Nuclear Nuclear Fuel Cost Components

16 U.S. Nuclear Industry Capacity Factors 1971 - 2007

100 91.8* 90

80

70

60

50

40 1971 1977 1983 1989 1995 2001 2007 Significant Events at U.S. Nuclear Plants: Annual Industry Average, Fiscal Year 1988-2006

Significant Events are those events that the NRC staff identifies for the Performance Indicator Program as meeting one or more of the following criteria: 0.90 •degradation of important safety equipment; 0.77 •a major transient or an unexpected plant response to a transient; •degradation of fuel integrity, the primary coolant pressure boundary, or important associated structures; •a reactor trip with complications; •an unplanned release of radioactivity exceeding the technical 0.45 specifications or regulations; 0.40 •operation outside the technical specification limits; •other events considered significant 0.25 0.26 0.21 0.17 0.10 0.08 0.07 0.07 0.04 0.04 0.05 0.04 0.05 0.03 0.01

1988 1990 1992 1994 1996 1998 2000 2002 2004 2006

Source: NRC Information Digest, 1988 is the earliest year data is available. Updated: 11/07 18 Expanding Duke’s Nuclear Fleet

McGuire Nuclear Proposed William S. Lee III Nuclear Station Station • Site: Gaffney, South Carolina

• Station capacity: 2,234 megawatts Oconee Nuclear • Number of units: 2 Station Catawba Nuclear Lee Nuclear Station • Reactor technology: Westinghouse AP1000 Station pressurized water reactor • Architect/Engineer: Shaw • Passive design features • Construction & operating license application submitted to U.S. Nuclear Regulatory Commission in December 2007

19 What is Driving the Renewed Interest in Nuclear in the U.S.

ƒ Need for baseload generation ƒ Climate change concerns and potential controls on carbon emissions ƒ Increasing support for nuclear energy from the public and policymakers ƒ Tremendous safety and performance record of existing nuclear fleet

20 Growing Need for Additional Baseload Capacity

ƒ U.S. Energy Information Administration—2007 Annual Energy Outlook ƒ Electricity demand in 2030 will be 45% greater than today ƒ To maintain current fuel supply mix would mean building:

21 Climate Change Considerations

22 Public, Policymakers Support for Nuclear Power

ƒ Polls show record high support for nuclear energy ƒ Governors, state and county officials express desire for new plants in their districts ƒ Energy Policy Act of 2005—bipartisan support for new nuclear plant construction

23 Key Issues for New Nuclear Plants

ƒ Economics & Financing ƒ Spent Fuel Management ƒ Workforce ƒ Manufacturing

24 Economics of New Baseload

ƒ New baseload capacity will be expensive ƒ Key financial considerations ƒ Loan guarantees from the federal government ƒ Supportive rate policies at the state level ƒ New nuclear plants will be competitive with other new sources of baseload electricity

25 Spent Fuel Management

Spent Fuel Pool Storage

Dry Cask Storage

26 U.S. Department of Energy’s Yucca Mountain Site

27 U.S. Spent Fuel Policy— Direct Disposal v. Recycle

Japan’s Rokkasho Recycling Complex

U.S. Department of Energy Global Nuclear Energy Partnership

28