Progress Energy Issues Overview April 25, 2006 Don Cooke Sr. Environmental Coordinator

2 Progress Energy at-a-glance Progress Energy service territory in green l 3 million customers l 24,500+ MW’s l 72,000 primary miles of distribution lines l 9,800 miles of transmission lines l 15,300 employees l $24 billion assets l $8 billion revenues l Fortune 250 company

3 Fuel Sources Year-End 2005

Clean Air

5 Emissions are down Source: EPA. "Latest Findings on National Air Quality: 2003 Status and Trends."

6 N.C. Clean Smokestacks Act l Clean Smokestacks Act signed into law l Developed cooperatively with Gov. Easley and legislative, regulatory, environmental and business leaders l Significantly cuts NO x and SO 2 emissions from utility-owned coal-fired power plants l Technologies will also reduce mercury emissions by more than two-thirds statewide l Model for other states to improve air quality

7 Source: Progress Energy’s Report to Shareholders, 2006 Clean Smokestacks Impact

8 How Does a Scrubber Work? A slurry of finely ground limestone (CaC0 3 ) is sprayed into a reaction tower, which has flue-gas flowing counter-current to the spray. The SO 2 in the gas reacts with the limestone, removing 97% of the S0 2 and making CaS0 4 (gypsum).

9 Emissions Control Equipment Boiler Scrubber Tower (Removes SO 2 ) Flue Gas SCR (Removes NOx) Precipitator (Removes Particulates) Stack

10 Clean Smokestacks Emissions Controls NOx Controls l 2006: Low-NOx burners - Lee 2, Sutton 2 l 2007: SCR - Asheville 1 l 2010: ROTAMIX - Lee 3

11 Clean Smokestacks Emissions Controls Sulfur Dioxide Controls (Scrubbers) l 2005: Asheville 1 l 2006: Asheville 2 l 2007: Roxboro 2, Roxboro 4 l 2008: Roxboro 1, Roxboro 3 l 2009: Mayo 1 l 2011: Cape Fear 6 l 2012: Cape Fear 5, Sutton 3

12 Additional Air Quality Regulations l Clean Air Interstate Rule l Clean Air Visibility Rule l Clean Air Mercury Rule

New Generation

14 A balanced solution l Increasing demand for electricity l Commitment - and obligation - to provide reliable and affordable electricity l Cannot rely on just one approach – requires a balanced solution w Efficiency & conservation w Supporting alternative energy technologies w Investing in new power plants

15 Electricity generation options l Coal l Natural gas l Renewable sources l Nuclear

16 Planning for new electricity generation l Factors considered include: w Fuel costs and availability w Environmental considerations w Load growth w Maintenance and operation costs w Construction and permitting time w Regulatory environment w Community support

17 Coal-fired plants Advantages l Baseload generation l Plentiful fuel supply l New technology reduces emissions Challenges l Environmental issues l New technology adds additional costs and risks l Fuel costs

18 Natural gas-fired plants Advantages l Fewer emissions than coal or oil l Efficient fuel source l Low capital costs l Construction time Challenges l Fuel volatility l Fuel accessibility l Limited world reserves

19 Wind technology Advantages l Plentiful resource in certain places l Renewable, domestic and emission-free l Land beneath wind structures can be used for farming and ranching l Low operating costs Challenges l Generation may not correspond with peak demand l Noise and sight pollution l Impacts wildlife l Requires extensive amounts of land l Siting difficulties

20 Solar technology Advantages l Plentiful resource l Renewable and emission-free l Low operating costs Challenges l Limited generating capability l High capital costs

21 Biomass Advantages l Plentiful in southeastern U.S. l Renewable l Co-firing potential l Could also address animal waste issues Challenges l Co-firing may not work on all units l Availability of some biomass sources

22 Nuclear energy Advantages l Baseload generation l Low fuel costs and adequate uranium supply l No greenhouse gas or air emissions Challenges l Capital costs l Delay in permanent used fuel repository l Public acceptance

23 Planning for the future l Considering new nuclear generation in Carolinas and Florida l Potentially plan to file two combined licenses (COL)s with the Nuclear Regulatory Commission by 2008 l Community involvement is key l COL applications do not commit company to building plants