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Proposal 2:
Approval of Amendments to Duke Energy's Restated Articles of Incorporation to Eliminate Classification of Duke Energy's Board of Directors

The Board of Directors recommends a vote FOR this proposal.

The Board of Directors has unanimously approved, and recommends that the shareholders approve, amendments to Duke Energy's Restated Articles of Incorporation to declassify the Board of Directors and to provide for annual election of directors.

Article VIII of the Restated Articles of Incorporation currently provides for the Board of Directors to be divided into three classes, as nearly equal in number as possible, with each class serving staggered three-year terms. The classification of the Board of Directors was adopted by amendment to the Restated Articles of Incorporation in 1991 following approval of the amendment by holders of over 80% of the then-outstanding Duke Energy Common Stock. Classification is intended to preserve the continuity and experience of Board members and to allow Duke Energy a level of protection against unfair treatment in takeover situations by eliminating the threat of abrupt removal and making it more difficult and time consuming to take control of the Board of Directors.

Some shareholder groups believe that classified boards reduce accountability and responsiveness of the Board of Directors by eliminating the ability to evaluate and elect all directors each year. A shareholder proposal seeking declassification of the Board of Directors was presented to shareholders at Duke Energy's 2004 annual meeting, and a majority of shareholders who voted on the proposal voted in favor of it.

After careful consideration of the issue, and in light of the shareholders' approval of last year's declassification proposal, the Board of Directors has determined that it would be in the best interests of Duke Energy to eliminate classification of the Board. While the Board of Directors believes that the benefits of a classified board are important, the Board is committed to ensuring maximum accountability by the Board and by management to Duke Energy's shareholders, and annual elections of directors would provide shareholders with a means of evaluating each director each year.

In connection with declassification of the Board, the Board of Directors has also approved, and recommends that shareholders approve, an amendment to the Restated Articles of Incorporation that conforms the provision for the filling of vacancies to the declassification of the Board. The Board of Directors has also approved conforming amendments to Duke Energy's By-Laws that would automatically take affect upon shareholder approval of Proposal 2. A copy of the proposed amendments to the Restated Articles of Incorporation is attached to this proxy statement as Appendix A.

If the shareholders approve Proposal 2, all directors, including those elected at this 2005 annual meeting of shareholders, would continue to serve the remainder of their terms, such that approximately one-third of the directors will stand for election in 2006, approximately two-thirds of the directors will stand for election in 2007 and all directors will stand for election in 2008, with their successors being elected for one-year terms that expire at the next annual meeting. However, the Board of Directors has unanimously adopted a resolution that, if shareholders approve Proposal 2, encourages all directors whose terms continue past the 2006 annual meeting of shareholders to resign effective with the 2006 annual meeting, so that all directors would stand for election in 2006.

Approval of the amendments to the Articles of Incorporation requires the affirmative vote of holders of at least 80% of the voting power of outstanding Duke Energy Common Stock.