News Release
Nov. 27, 2000

DUKE ENERGY PROPOSES TO MANAGE ALL OF SDG&E’S ELECTRICITY NEEDS FOR NEXT FIVE YEARS AT LOW FIXED PRICE

MORRO BAY, CALIF. – Duke Energy, through its business unit Duke Energy North America (DENA), has put forth another bold solution to California’s electricity crisis by proposing to manage San Diego Gas & Electric’s (SDG&E) 3,300-megawatt electricity load at a fixed price of 6 cents per kilowatt-hour for the next five years. This proposal is based on market prices for electricity and natural gas as of Nov. 17, 2000.

DENA’s proposal, which takes into account SDG&E’s seasonal and hourly load requirements and has a 3-percent annual adjustment for inflation, was included in comments DENA submitted to the Federal Energy Regulatory Commission last week in response to the commission’s proposed remedies for California’s electricity market.

Under DENA’s proposal, SDG&E’s business and residential customers no longer would be exposed to the electricity price spikes they experienced this past summer when their retail electricity prices often exceeded 18 cents per kilowatt-hour.

"The 3,300 megawatts represent the full electricity load SDG&E needs to serve its retail customer base during the hottest summer day," said Jeff Stokes, DENA executive vice president for the Western region. "We again have stepped up with tangible, market-based solutions that can be implemented to address the San Diego area’s electricity price spikes. In addition to stabilizing customers’ power bills, our proposal would also eliminate SDG&E’s exposure to high wholesale electricity prices and the financial uncertainty that goes along with that exposure."

California is facing high wholesale electricity prices largely because of supply and demand imbalance, which has caused the California Independent System Operator (Cal-ISO) to call an unprecedented 20 "Stage Two Electrical Emergencies" thus far in 2000 when available electricity supplies have fallen below 5 percent. The primary causes for the electricity supply shortfall are the state’s economic growth, the lack of new power plants being built in California over the past decade, an aging generation fleet that requires more maintenance and electricity imports being less available due to economic growth throughout the West. California’s electricity supply and demand imbalance is expected to worsen or show little improvement until the summers of 2002 and 2003, which is the earliest a substantial amount of new, more efficient and cleaner power plants can be brought on line.

"This is another key market-based solution to California’s electricity crisis made by Duke Energy over the past four months and we hope that it is given serious consideration," said Bill Hall, DENA vice president of asset management for the Western region. "The competitive wholesale electricity markets did not cause this electricity crisis; but with patience, wisdom and bold behavior by all market participants, we can fix the crisis and not burden the state’s electricity ratepayers or taxpayers."

DENA has taken the following steps recently to address California’s electricity shortfall and high prices:

For more information about DENA’s California operations, power plant modernization plans and position on California’s electricity crisis, see the Web site www.duke-energy.com/California.

DENA is a leading wholesale energy services company. DENA and its affiliates including Duke Energy Trading and Marketing provide 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.

Contact: Tom Williams
Phone: 805/595-4270
24 Hour Phone: 877/364-5170
Email: tcwillia@duke-energy.com