Matt Smith – Director, Technology Development and Utility of the Future Project Creating the Utility of the Future

Who is Duke Energy?  Fortune 500  Assets over $48 billion  3.9 million customers  Top-tier electric utility  Top 5 for U.S. generating capacity  150+ years of service  Traded on NYSE as DUK  Stock dividends for 80+ years

5 states: North Carolina, South Carolina, Indiana, Ohio and Kentucky 47,000 square miles of service area ~28,000 MW 3.8 million retail electric customers 500,000 retail gas customers US Franchised Electric & Gas

Latin American Assets Sao Paulo Buenos Aires Lima Guatemala City Mexico City 4,000+ MW 6 countries: Brazil, Argentina, Peru, Ecuador, El Salvador and Guatemala Regional Office Operating Asset

Vision and Strategy Statement for the Utility of the Future Team Vision Statement for the Utility of the Future Project  Our vision is to transform the operation of our electric power grid by creating a networked infrastructure capable of delivering and receiving information from intelligent devices distributed across our power system, automating components of the distribution system and leveraging the network for improved operational efficiencies and improved customer satisfaction. Strategy Statement for the Utility of the Future Project  Our strategy is to investigate, select and deploy intelligent devices across our distribution system which will measure, protect and automate the grid, combined with a communication system linking the intelligent devices in a networked fashion, creating opportunities for system wide load response, enhanced outage management, better asset management, more efficient operations, and empowering customers to use electricity more efficiently.

Distribution Substation Step-down Transformer Customer Step-down Transformer Load Distribution Lines 4,160, 12,500, 24,000 Volts Metering and Sensing Devices Metering and sensing devices will deliver information along a digital communication infrastructure. Data Collection and Transmission Nodes along the distribution lines will collect data about the system and communicate to the operations center in real time across a digital communication infrastructure Digital Communication Infrastructure The communication system will provide a mechanism for transmitting data, controlling and automating multiple devices along the distribution path, including applications behind the meter Innovations at the Transformer The transformer will support various endpoint measurement an control, including potential metering advances. Creating a Digital Grid

Digital components are easier to scale as the system grows Programmability of digital devices is easier –Ability to build intelligence into end devices Advances in digital technology can be adopted from other industries Richness and volume of data available using a digital system is superior to analog Digital controls enables near real-time operational decision making Automated meter reading at more frequent intervals Workforce and work order management is enhanced Remote connect and disconnect capability More accurate meter reading and billing Outage management improvements Power quality monitoring Asset management OperationsBenefits The Benefits of the Digital Grid - Operations

Digital applications are widely supported across industries Data communication is easier and faster using digital technology Graphical user interface for the utility and utility customers becomes a reality A variety of technology solutions, such as wireless, BPL, Wi-max, etc., are available using digital communications CommunicationsBenefits Broadens the scope of customers eligible for demand response programs Asset optimization through real time information flow Better load forecasting and load study data at more frequent intervals Enables real time rate structures Load control capability Firmware upgrades reducing the potential hardware obsolescence The Benefits of the Digital Grid – Communication

Revolutionary vs. Evolutionary Changes One way information flow Invites tampering Incremental changes to the meter dictated by existing back office processes Metering Today Electromechanical in a digital age Networked Communication Business process dictates meter technology Bi-directional Information flow from the meter Meter can be the gateway to home automation Interface with the utility becomes dynamic creating real time information capabilities Enables additional utility services No power data nor control The meter is another sensor in a wide array of interactive sensors on the network

Connecting the Network Higher bandwidth Increasing number of communications nodes Distributed generation control Multiple backhaul paths Device interoperability Open communications protocols Utility price signals to smart appliances Meter as a premise “portal” Remote connect/disconnect Upgradeable firmware Meter Utility Back Office Utility Substation Customer Premise Remote Access Trends in Network Communication Integration of Operations and Communications

Selection Criteria and Guiding Principles Networking infrastructure project, not just AMI or AMR Standards-based hardware and software products Operational and business decisions should not be constrained by infrastructure choices Guiding principles include: –Ability to choose products and services from best in class companies –Communication network can carry information from any device –Standard connections with minimal integration efforts –Ability to remotely upgrade and adapt devices

Key Concepts Leading to the Utility of the Future Utility Head End System Proprietary network does not “exclude” other utility assets WAN selection is not dependent on meter technology Communication to the home can go through or around the meter Open, IP based standards “invites” innovation from outside the utility industry Multiple devices can use the WAN

Infrastructure Project Leading to... Remote control of electrical household appliances Energy management Energy information retrieval and delivery New tariff offerings Home comfort Custom energy solutions Measurement and verification of demand participation Duke Energy’s customer offerings will increase

Utility of the Future – A Networked Power System Smart Grid Enhanced Functions Capacity Planning Capital Investment Generation Work Management Customer contracts AMR & Billing Distribution Trends Distribution Automation Reads Queries Installation & Services Quality Roll Out Customer Information Supply Chain Improvements Revenue Enhancement Operational Flexibility Demand Forecasting Corporate Strategy Asset Management

16 NES Architecture & Components Networked Energy Services

17 Extending Into the Home Power lines are the ideal connection into the home –More reliable and economical than RF –ANSI 709 open standard –1,000+ LonMark Certified products –Secure authenticated and encrypted data exchange PLC in Meter reaches every home outlet and switch PLC is not blocked by or interfered with existing 2.4GHz home networks PLC is not subject to RF multi-path fading in fixed point communication PLC can be used to bridge to home gateway and RF devices inside the home The NES network provides a low-cost, universal, bi-directional communications

18 Fundamental Design Principles Leverage the power of networks Data networks share expensive resources to reduce cost per connected point –Networked printers, networked servers, shared broadband connection, … Advanced metering networks should too –Spread cost of “expensive” components (e.g., modems, backhaul connection) across many meters and devices The NES system is not a “PLC” system The NES system is not an “RF” system The NES system is an IP networked system – Leverages the strengths of each to lower deployment cost, lower operating costs, and lower life-cycle costs

19 Fundamental Design Principles Use best-of-breed standards Each element of the system uses standards optimized & proven for that application domain  Meters built on proven metering standards ANSI C12.18, ANSI C12.19  Networks built on proven networking standards ANSI 709, TCP/IP  IT interfaces built on proven enterprise standards XML/SOAP (Web services) Leads to highest quality & security Drives down cost of network connectivity, IT integration –The largest contributors to total cost of ownership for an advanced metering system

20 Fundamental Design Principles “Never visit the meter again” High level of “base” functionality built into every meter Enable/configure functionality remotely instead of replacing products –Built-in, firmware controlled disconnect in every meter –Hourly metering and multi tariff in every meter –Prepay support in every meter –Power quality in every meter –Multi-channel data logger/load profiling in every meter –… Remote upgrade rather than replacing products –All components support remote firmware upgrade Long-lived, reliable products –Designed for >20 year life with <0.3% annual failure rate

21 NES Meters Market-leading advanced functionality Detailed electrical measurements –Active and reactive energy –Import and export metering –Flexible time of use metering Extended information & alarms –Multi-channel data recorder –Power quality data and alarms –Tamper and theft detection –Connectivity to other meters and devices 200A disconnect under glass –On/off –Load limiting/service upgrade to any level –Prepay “Virtual IP” card in every meter –Share a single physical IP connection –Communicate to in-home devices Remote firmware download support Designed for >20 year life with <0.3% annual failure rate Traditional, compact form-factor

22 NES network operating system –Enables choice of off-the-shelf applications –Supports quick development of custom applications and integrations Scalable to millions of devices Redundant architecture Backward-compatible Standards-based SOA NES System Software Web services interface based network operating system Utility Software Web servicesWeb events IP WAN NES System Software

23 NES is the Platform for Smart Grid NES Smart Meter with IP Open Web Services API Network Operating System PLC A Band for Utility Distribution Automation Networks Meter Expansion Port TCPIP WAN or LAN NES Smart Meters L ON M ARK ® i/f + RF NES System Servers Database Data Collection Configuration Security Home Automation Networks Building Automation Networks IP HAN Gate way Open HAN RF