Duke Energy Kentucky Reaches Settlement Agreement on Electric Rate Increase - Duke Energy

News Release
Oct. 26, 2006

Duke Energy Kentucky Reaches Settlement Agreement on Electric Rate Increase

CINCINNATI – Duke Energy Kentucky announced today that it has reached a settlement agreement with the Kentucky Attorney General and other parties on the company’s first increase in base rates for electric service in 14 years.

The agreement calls for an increase of $49 million, or 20 percent, in annual revenues to be effective Jan. 1, 2007, if approved by the Kentucky Public Service Commission (KPSC). The company’s original application sought a proposed increase of $67 million, or approximately 28 percent. Its last base rate increase took effect in June 1992.

Under the settlement, the monthly bill for a typical residential customer using 1,000 kilowatt-hours of electricity would increase from $65.89 per month to $76.84 per month. Commercial and industrial customers should expect increases of approximately 21 percent. Even with this increase, Duke Energy Kentucky’s rates will remain well below the national average.

“This settlement represents a reasonable resolution of the issues in this case and softens the initial impact of the rate increase,” said Sandra Meyer, president of Duke Energy Kentucky. “If approved by the KPSC, the settlement will allow us to continue to provide safe, reliable electric service to our Northern Kentucky customers.”

The key reasons for the increase are the company’s higher investments to provide an adequate electric supply and a reliable electric delivery system. In addition, the costs of coal, natural gas and purchased power have increased significantly since the company’s fuel rate was frozen in 2001. Approximately $20 million of the $49 million increase is the result of higher fuel costs. Beginning in 2007, the monthly adjustments for fuel costs will resume.

Duke Energy Kentucky recently acquired approximately 1,100 megawatts of generating capacity to provide an adequate supply of electricity for Northern Kentucky customers. The generating capacity, totaling approximately $400 million in net book value, was acquired from Duke Energy Ohio, which had been supplying electricity to Northern Kentucky for many years under a wholesale power supply contract.

The acquisition of generating capacity was approved in 2003 by the KPSC as the lowest cost alternative to provide a dedicated electric supply for Duke Energy Kentucky. Included in the acquisition were East Bend Station, Woodsdale Station and Miami Fort Station Unit 6.

Duke Energy Kentucky has also invested approximately $170 million in its electric delivery system to meet growth and maintenance needs since the last rate increase was filed in 1991. The company has added more than 35,000 customers in Kentucky in the last 15 years.

The $1.3 million annual rate credit to share cost savings from the Cinergy-Duke Energy merger will continue to be in effect through April 2011, resulting in costs to customers that are lower than they otherwise would have been without the merger.

To assist customers in managing their energy usage and bills, Duke Energy has several resources available that can be accessed through the “Lower Your Winter Bill” section of the company’s website, www.duke-energy.com, or by calling 1.866.2ENERGY (236-3749).

Duke Energy is a diversified energy company with a portfolio of natural gas and electric businesses, both regulated and unregulated, and an affiliated real estate company. Duke Energy supplies, delivers and processes energy for customers in the Americas, including 28,000 megawatts of regulated generating capacity in the United States. Duke Energy’s Kentucky operations provide 1,100 megawatts of safe, reliable and competitively priced electricity to more than 130,000 electric customers; the company also provides natural gas service to 93,000 customers in Northern Kentucky. Headquartered in Charlotte, N.C., Duke Energy is a Fortune 500 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: Steve Brash
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