1. Duke Power Clean Smokestacks & Mercury Efforts April, 2004

2. April 2004 2 NC Clean Smokestacks Bill NOx and SO2 Caps for Duke Power: SO2 2003 – 264,000 tons 2009 - 150,000 tons 2013 - 80,000 tons NOx 2003 – 76,000 tons 2007 - 35,000 tons 2009 - 31,000 tons

3. April 2004 3 NC Clean Smokestacks Bill Duke Power Compliance Strategy: SO2 - Scrubbers on 12 Largest Units. NOx - SCR on 3 Units. NOx - SNCR & Low NOx Burners on All Other Units.

4. April 2004 4 Mercury – A National and Global Issue Mercury is naturally occurring and cycles through the environment around the globe. The issue is methylmercury: Mercury sources are numerous and global. Methylmercury is formed by natural processes. Controlling power plants may have little impact on mercury deposition or methylmercury levels in fish. Mercury regulation is being addressed at the national level. Federal rules and NC Legislation will reduce mercury emissions in NC.

5. April 2004 5 Mercury - Power Plants Power Plants in the US: About 1/3 of Total US Non-Natural Emissions. About 1 % of Total Global Emissions. Mercury in coal is a trace element and concentrations emitted are very small. Low concentration makes control difficult. Control technologies not commercially ready. Extended run times needed to determine full impact. Inhalation of mercury from power plants is not an issue.

6. April 2004 6 Mercury - USEAP Proposed Rule Two Alternatives for Compliance (Nationwide) MACT – Station by Station control Compliance by 2008 (2009 if a one year extension) Bituminous Coal - 2#/Tbtus Or Market Based Cap and Trade Phase I (Co-benefits from IAQR) 2010 Cap to be set summer 2004. Phase II - 2018 15 tons/yr nationwide cap Either Way: Federal Regulation Is Coming Expected Final rule 12/04

7. April 2004 7 Mercury 101 Mercury types from coal combustion. Elemental (Hg°) 40 to 60% (Bituminous Coal) Oxidized (HgCl) 40 to 60% (Bituminous Coal) Particulate Mercury 5% (Bituminous Coal)

8. April 2004 8 3 Units 39% of projected system MW-hrs SCR oxidizes Hg to HgCl (80 – 90+%) Cold Side ESP 25 – 35% Hg collection FGD collects 80-90+% of oxidized Hg Expected overall Mercury removal of 80 to 90% reduction Duke Research: 2001 – Collection efficiency across ESP (Marshall & Allen). 2002 – Mercury oxidation with & without SCR (Cliffside 5). 2004 – August: Mercury collection from pilot FGD (Marshall). Mercury 101 (Co-Benefits) Case 1: SCR, ESP, & FGD Boiler SCR AHAH ESP FGD Stack

9. April 2004 9 9 Units 43% of projected system MW-hrs Cold Side ESP 25 – 35% Hg collection FGD collects 50 to 60+% of remaining Hg Expected overall Mercury removal of 55 to 65% reduction Duke Research: 2005 – DOE: Pilot of oxidation catalyst downstream of ESP (Marshall). 2004 – 1/04: Impact of Low NOx combustion on oxidation & ESP Collection efficiency (Marshall) – Increased oxidation & collection eff. 2004 – 5/04: Verification of the impact of Low NOx combustion with different coals and unit (Allen). Mercury 101 (Co-Benefits) Case 2: ESP, & FGD Boiler AHAH ESP FGD Stack

10. April 2004 10 1 Units 1% of projected system MW-hrs Cold Side ESP 25 – 35% Hg collection Duke Research: 2004 – DOE: Southern Co testing with activated carbon & impregnated carbon. Results to date 60-70% removal with activated carbon. Impregnated carbon may increase removal with less injection. Mercury 101 (Co-Benefits) Case 3: Cold Side ESP Boiler AHAH ESP Stack

11. April 2004 11 18 Units 17 % of projected system MW-hrs Hot Side ESP 0 – 9 % Hg collection Duke Research: 1999 – EPA ICR data request stack test on Cliffside 1. 2003-2005 DOE: Impregnated carbon injection on Hot Side ESP. 9/03 – 1 wk trial Cliffside 2 Reduction: 30% full load, 70+% low load 9/04 – 1 wk trial Cliffside 2 (verification of 9/03 results) 2/05 – 1 month trial Buck 5 Mercury 101 (Co-Benefits) Case 4: Hot Side ESP Boiler AHAH ESP Stack

12. April 2004 12 Cliffside Unit 2 Hot Side ESP Hg Control September 2003 trial.

13. April 2004 13 Summary Duke has a plan to address NC Clean Smokestacks Bill and installation of controls are underway. Mercury is a global issue. Utility reductions may have little impact on deposition in the US. Mercury emissions in NC will be reduced through co-benefits of SO2 and NOx control. Proposed federal regulations for SO2, NOx and Mercury will achieve significant utility mercury reductions. Duke is actively participating in testing emerging mercury control technologies. Additional research and longer term trials needed to determine achievable levels of mercury reduction. Continuous measurement of mercury is in the very early stage of development.