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Questions and Answers

Portions of this section were taken from the Duke Energy filing and supporting testimony to the North Carolina Utilities Commission on June 2, 2006.

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Describe the emission controls designed for the Cliffside Project.

The Cliffside Project will feature state of the art emission controls to reduce sulfur dioxide, nitrogen oxide, particulate matter, sulfuric acid mist and mercury. The boiler design will include low NOx burners and overfire air to minimize the formation of nitrogen oxide, and a selective catalytic reduction (SCR) system to reduce nitrogen oxide and to oxidize mercury. Following the boiler and SCR will be the spray dryer absorber and fabric filter baghouse to remove hydrogen sulfides, hydrogen chlorides, hydrogen fluorides, mercury and flyash. Next, the flue gas desulfurization (FGD or “scrubber”) system will reduce sulfur dioxide, other acid gases and oxidized mercury.

How will the addition of the Cliffside Project affect Duke Energy Carolinas’ compliance with North Carolina’s Clean Smokestacks law?

Duke Energy Carolinas will continue to comply with the Clean Smokestacks law. We plan to retire the existing 1940s Cliffside units 1-4 as part of the construction of the new unit. If needed, we will achieve any additional emission reductions required by the Clean Smokestacks law through operational changes, the installation of additional environmental controls and/or the retirement of additional existing generation.

The Cliffside Project emission control equipment is capable of removing approximately 99 percent of the sulfur dioxide emissions and approximately 90 percent of the nitrogen oxides from the flue gas, thereby, producing very low emissions. Following the addition of the new Cliffside unit, the addition of a scrubber to Cliffside Unit 5 and the retirement of the older Cliffside units, Duke Energy’s net capacity will increase by approximately 602 megawatts. However, sulfur dioxide emissions at Cliffside will decrease by half if the new unit is operated at its maximum limit requested in the air permit application. If the entire Cliffside facility operated at the maximum nitrogen oxides emission limit requested in the air permit application, and operates at 100 percent capacity factors it will result in a slight increase in site nitrogen oxide emissions as a result of the Cliffside Project. Any increase in Cliffside nitrogen oxide emissions will be offset by reductions across the Duke Energy Carolinas system and ensure continued compliance within the Clean Smokestacks specifications.

How does Duke Energy Carolinas’ development of new coal-fired generation fit with the potential for future regulatory constraints on carbon emissions?

Duke Energy continues to play a lead role in shaping national policy on global climate change. We believe Congress should implement an economy-wide greenhouse gas reduction program that addresses climate change responsibly and fairly. While we believe that it is important to take steps to address climate change, we also realize that meeting customers’ electricity needs in a cost effective manner requires that we develop a diverse portfolio of supply options. Fuel diversity is an important component of such a strategy. When we survey the utility regulatory environment across the United States, it appears that states with greater fuel diversity generally have lower rates for customers than those with less diverse generation portfolios.

Coal is an abundant resource in the United States and supports our nation’s energy security. While we are mindful and supportive of the need to reduce greenhouse gas emissions, we believe that coal will continue to play a significant role in energy production in the future. The state of the art technology and emissions reduction equipment we plan to use at the Cliffside Project will enable us to use this vital and cost effective resource in a manner that minimizes our environmental footprint.

In addition, the Cliffside Project calls for the retirement of the 1940s vintage Cliffside units 1-4. As we continue to modernize our generation fleet, Duke Energy will continue to meet our customers’ energy needs reliably and economically -- even as we continue to be at the forefront of the climate change policy debate.

What is the expected environmental impact to the Broad River as a result of the Cliffside Project?

The proposed facility will employ cooling towers similar to Cliffside Unit 5. Use of cooling tower technology will minimize both the intake and discharge impacts to the Broad River. The older Cliffside Units 1-4 use once-through cooling water systems. By retiring these units and using cooling towers for the Cliffside Project, there will be a dramatically reduced flow requirement that will allow continued use of the existing intake and therefore require no new intake structure. Cooling tower discharge through the station’s ash basin will result in no increase in thermal loading to the Broad River.

Under typical river flows, withdrawal of water is not expected to have a measurable impact on Broad River water quality. The Cliffside National Pollutant Discharge Elimination System permit has been modified for the new unit. The North Carolina Department of Environment and Natural Resources has approved the project Erosion Control Plan.

Based upon Duke Energy Carolinas’ technology evaluation, why was a supercritical pulverized coal plant selected?

Our analysis demonstrated that supercritical pulverized coal technology is the most cost-effective, commercially available and viable option for Duke Energy Carolinas’ needs. The chosen technology also met additional evaluation criteria:

  • adequate fuel flexibility (capable of using a variety of high and low sulfur fuels)
  • operational reliability (high capacity factor)
  • operating flexibility (ramp rate, turn down and ability to meet emission rates at various loads)
  • proven technology/availability (substantial operating experience with this technology)
  • environmental flexibility (ability to meet potential future regulatory requirements).

The supercritical pulverized coal technology is more advanced and efficient than conventional coal-combustion technologies currently in operation. It is also more cost-effective than the integrated gasification combined cycle (IGCC) technology for Duke Energy Carolinas’ 2012 needs.

How does Duke Energy view the development of integrated gasification combined cycle (IGCC) technology?

Duke Energy believes that IGCC is a promising generation technology and it was considered for Duke Energy’s operations in the Carolinas. Based on comprehensive integrated resource planning and technological evaluations conducted by Duke Energy, the pulverized coal option was selected instead of IGCC for the Cliffside Project. Duke Energy will continue to support the development of IGCC technology and will use it where it is cost-effective and best meets the needs of our customers. For example, in Indiana, Duke Energy has performed preliminary engineering and design work for a 600-megawatt IGCC plant it is considering for its service territory.

Why did Duke Energy choose to pursue the construction of an IGCC facility in Indiana, but not in the Carolinas?

Indiana has abundant local coal reserves, and there is strong local and state support for an IGCC facility to promote this local resource. IGCC initial capital costs are expected to be approximately 15 percent higher than supercritical pulverized coal generation. As a result, the investment tax credits, property tax abatement and tax increment financing credits from local and state government, and potential investment tax credits from the federal government specifically for IGCC technology, are significant factors driving the deployment of this technology in Indiana.

Duke Energy Indiana has experience with this technology at its Wabash River IGCC demonstration facility it helped develop in the 1990s. Studies conducted also demonstrate that the Indiana site has the geological potential for future carbon dioxide sequestration. For these reasons, we decided to pursue the next generation of IGCC technology in Indiana.

Elaborate on why Duke Energy Carolinas did not select IGCC technology for the Cliffside Project.

IGCC is a promising, but still developing technology. From a technology standpoint, there currently are no IGCC plants larger than 300 megawatts operating or under construction. There are two IGCC plants currently operating in the United States: Tampa Electric Company’s Polk Station, a 250-megawatt Department of Energy (DOE) demonstration project brought on line in September 1996 and Duke Energy Indiana’s Wabash River 262-megawatt DOE demonstration IGCC plant in Indiana, which was completed in 1995. A number of larger commercial IGCC projects are under development, including Duke Energy Indiana’s proposal with GE Energy and Bechtel to evaluate the possible construction of a new 600-megawatt IGCC plant in Indiana. Additional issues also made IGCC less suitable for Duke Energy Carolinas’ 2012 base load needs than pulverized coal, including  higher initial costs, limitations on load following and cycling capability, and lack of suitable geologic formations to support CO2 emission sequestration in Duke Energy Carolinas’ service territory.

How do renewable resources fit into Duke Energy Carolinas’ plans?

Duke Energy Carolinas has supported renewable energy through support of the North Carolina GreenPower program, the collaborative development of model small generator interconnection standards approved by the North Carolina Utilities Commission, implementation of a Small Customer Generator Rider, and purchased-power contracts with Qualifying Facility renewable energy providers. In addition, Duke Energy requested renewable energy bids in a Request for Proposals for purchased power. Duke Energy Carolinas is committed to supporting the development of renewable energy resources within the regulatory structure afforded it as a regulated utility in North Carolina.

Describe the company’s existing demand side management programs.

In general, demand side management programs fall into two primary categories: demand response (interruptible or time-of-use) and energy efficiency. Demand side management programs can vary greatly in their dispatch characteristics, size and duration of load response, certainty of load response and frequency of customer participation.

Duke Energy Carolinas’ current demand response programs include load control curtailment programs, interruptible power service, standby generator control, and residential service controlled water heating. The load control curtailment programs include residential air conditioning direct load control with approximately 190,000 customers and residential water heating direct load control with approximately 35,000 customers. The interruptible programs include approximately 150 commercial and industrial customers with interruptible power service and 150 commercial and industrial customers with standby generator control. These interruptible programs reduce summer 2006 capacity needs by an expected 766 megawatts. Duke Energy Carolinas’ time-of-use rates are structured such that customers can reduce their energy bills by shifting load from on-peak hours to off-peak hours, helping Duke Energy Carolinas avoid the need for new generation. While participation on Duke Energy Carolinas’ residential time-of-use rates is small, industrial and large commercial customers on North Carolina time-of-use rates represent almost 70 percent of total megawatt-hour sales to non-residential North Carolina customers. The impact of time-of-use rates is incorporated into the load forecast.

What demand side management programs were considered in the planning process?

Duke Energy Carolinas considered the following potential demand-response programs in the planning process: Residential Air Conditioning Direct Load Control, Interruptible Service, Standby Generation and various energy efficiency programs. Additional direct load control could be designed to target residential or commercial class customers. Potential load sources that could be directly controlled include water heating, air conditioning and swimming pool pumps. Interruptible service could be designed to target large commercial or industrial customers, and standby generation could be designed to target any size commercial or industrial customer. Duke Energy Carolinas considered bundles of energy efficiency programs by customer class at increasing costs.

Will the development of the Cliffside Project impact Duke Energy Carolinas’ strategy for pursing additional demand side management resources in the future?

Absolutely not. Duke Energy Carolinas is developing a demand side management plan that will take into consideration a number of efforts, including the work of the national Energy Efficiency Action Plan initiative co-chaired by our CEO Jim Rogers. As a result of the Cinergy merger, we see the potential to incorporate the former Cinergy experience with demand side management as a best practice into Duke Energy Carolinas’ approach in North Carolina. The former Cinergy utilities have had success in Ohio and Kentucky working through collaborative processes with interested stakeholders to develop new demand side management approaches.

Describe Duke Energy Carolinas' Existing energy efficiency programs.

Duke Energy Carolinas’ energy efficiency programs include:

  • Residential Energy Star - promotes the development of homes that are significantly more energy-efficient than standard homes
  • Existing Residential Housing - provides loans to encourage increased energy efficiency in existing residential structures
  • Special Needs Energy Products Loan - provides loans to low-income customers to encourage increased energy efficiency in existing residential structures.

The impact of these efficiency programs is incorporated into the load forecast. Duke Energy has filed a new energy efficiency plan in North Carolina.