News Release
July 31, 2000

DUKE ENERGY OFFERS GOVERNOR DAVIS SOLUTIONS TO CALIFORNIA'S POWER SUPPLY SHORTFALL

Committing to Deliver 3,000 Megawatts of New Supply to California and a Five-Year Fixed Price Supply Contract

Houston/Moss Landing, Calif. -- Duke Energy North America (DENA) today offered to California Governor Gray Davis specific solutions to address the state’s electricity supply shortage proposing to deliver 3,000 megawatts of new supply through the construction of generation facilities. In addition, DENA proposed a five-year, fixed-price supply contract to incumbent utilities to address the immediate concern with volatile electricity prices.

"California's high electricity prices during peak-demand periods result from insufficient supply to meet the demand," said Jim Donnell, president and chief executive officer of DENA. "In the past ten years, no significant new power generation facilities have been built in California. During the same period, peak demand has risen more than 10,000 megawatts. This combination has caused the state’s reserve margin to fall to less than 2 percent, which necessarily results in higher prices and abnormal volatility."

Under current procedures, it takes in excess of four years to deliver new power generation in California. To add substantial incremental generating capacity to California, DENA proposed Governor Davis use his existing authority under the California Emergency Services Act to streamline the permitting process to facilitate the rapid construction of environmentally friendly generation by 2001. DENA also asked the governor to use his current authority to allow California utilities to enter into bilateral contracts with energy providers, so they could better manage their exposure to high energy prices.

To help solve the state's supply shortfall, DENA said it remained committed to adding substantial generation in California. Within two months and upon receiving final regulatory approvals, the company will begin construction on 1,000 megawatts at its Moss Landing facility. The expansion of the current 1,478-megawatt facility will be in commercial operation by summer 2002. And, with an expedited permitting process, DENA could deploy its available resources to construct an additional 500 megawatts for commercial operation in 2001 and 1,500 megawatts for 2002.

To address the concern associated with the high energy prices experienced this year, DENA offered to provide up to 2,000 megawatts of electricity to the incumbent utilities at $50 per megawatt-hour for a five-year period beginning Sept. 1, 2000. This would mitigate the exposure to price spikes, for a reasonable time period during which additional generation resources can be built.

"DENA is committed to help bring electricity price stability for the citizens of California through these proposals," Donnell said. "We are confident that our expertise in building and operating power generation facilities can help resolve the supply crisis."

Duke Energy North America (DENA), is a leading wholesale energy services company. DENA, and its affiliates, including Duke Energy Trading and Marketing, provides natural gas and power supply and services, and risk management products to wholesale energy producers and users. DENA also develops, owns and manages a portfolio of merchant generation facilities. DENA is a wholly owned subsidiary of Duke Energy.

Duke Energy, a diversified multinational energy company, creates value for customers and shareholders through an integrated network of energy assets and expertise. Duke Energy manages a dynamic portfolio of natural gas and electric supply, delivery and trading businesses -- generating revenues of nearly $22 billion in 1999. Duke Energy, headquartered in Charlotte, N.C., is a Fortune 100 company traded on the New York Stock Exchange under the symbol . DUK. More information about the company is available on the Internet at: www.duke-energy.com.

Note for members of the media: Duke Energy North America will hold an audioconference today at 1 p.m. Pacific time. Jim Donnell, president and chief executive officer, will discuss DENA's position and proposed solutions for California's power supply crisis. Media representatives should dial 800/289-0437 and provide access code 744661 to participate in the call. The call will be replayed later this afternoon. Dial 888/203-1112 for the replay and use the same access code above.

Contact: Tom Williams
Phone: 805/595-4270
24 Hour Phone: 704/382-8333
Email: tcwillia@duke-energy.com
Contact: Bryant Kinney
Phone: 704/382-2208
24 Hour Phone: 704/382-8333
Email: jbkinney@duke-energy.com