Through December 31, 1998, the PanEnergy plan provided retirement benefits (i) for eligible employees of certain subsidiaries that are generally based on an employee's years of benefit accrual service and highest average eligible earnings, and (ii) for eligible employees of certain other subsidiaries under a cash balance formula. In 1998, a significant amount of lump sum payouts was made from the PanEnergy plan resulting in a settlement gain of $10 million. Effective January 1, 1999, the benefit formula under the PanEnergy plan, for all eligible employees, was changed to a cash balance formula.

In connection with the expected 1999 sale of the Midwest Pipelines to CMS Energy, benefit accruals under the PanEnergy plan were frozen on December 31, 1998, for all participants who, as a result of the sale, will become employees of CMS Energy and its subsidiaries. Once the transfer of benefit obligation and related assets of the affected participants to CMS Energy is completed, the PanEnergy plan will be merged into the Duke Energy Plan.

On December 31, 1998, all defined benefit retirement plans maintained by Duke Energy, except for the PanEnergy plan, were merged to form the Duke Energy Retirement Cash Balance Plan (Duke Energy Plan). The plan merger changed the benefit for certain participants, from a formula based primarily on benefit accrual service and highest average earnings, to a cash balance formula.

Duke Energy's policy is to fund amounts, as necessary, on an actuarial basis to provide assets sufficient to meet benefits to be paid to plan participants. On December 30, 1997, assets and related liabilities of $236 million and $204 million, respectively, for certain PanEnergy plan participants were transferred to the Duke Power plan. As a result of this transfer, no contributions to the Duke Power plan were necessary in 1998 or 1997.

In 1998, Duke Energy adopted SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement Benefits," which required the restatement of prior year data. This restatement did not change the net periodic expense or the funded status of the retirement or postretirement benefit plans.

Components of Net Periodic Pension Costs
	For the Years Ended December 31,
(In millions)	1998			1997			1996
Service cost benefit earned during the year	$	63		$	62		$	63
Interest cost on projected benefit obligation		169			164			153
Expected return on plan assets		(218	)		(209	)		(192	)
Amortization of prior service cost		(4	)		(5	)		(2	)
Amortization of net transition asset		(4	)		(4	)		(5	)
Recognized net actuarial loss		10			17			13
Settlement gain		(10	)		--			--
Net periodic pension costs	$	6		$	25		$	30

Reconciliation of Funded Status to Pre-funded Pension Costs
	December 31,
(In millions)	1998			1997
Change in Benefit Obligation
Benefit obligation at beginning of year	$	2,372		$	2,126
Service cost		63			62
Interest cost		169			164
Plan amendment		5			11
Actuarial loss		141			179
Special termination benefit		--			2
Benefits paid		(210	)		(172	)
Benefit obligation at end of year	$	2,540		$	2,372
Change in Plan Assets
Fair value of plan assets at beginning of year a	$	2,725		$	2,445
Actual return of plan assets		406			451
Employer contributions		1			1
Benefits paid		(210	)		(172	)
Fair value of plan assets at end of year a	$	2,922		$	2,725
Funded status	$	382		$	353
Unrecognized net experience loss		2			81
Unrecognized prior service cost reduction		(27	)		(65	)
Unrecognized net transition asset		(25	)		(32	)
Pre-funded pension costs	$	332		$	337
a Principally equity and fixed income securities.

Assumptions Used for Pension Benefits Accounting a
(Percent)		1998			1997			1996
Discount rate		6.75			7.25			7.50
Salary increase		4.67			4.15			4.80
Expected long-term rate of return on plan assets		9.25			9.25			9.18
a Reflects weighted averages across all plans.

Duke Energy also sponsors employee savings plans which cover substantially all employees. Employer matching contributions of $53 million, $53 million and $35 million were expensed in 1998, 1997 and 1996, respectively.

Other Postretirement Benefits. Duke Energy and most of its subsidiaries provide certain health care and life insurance benefits for retired employees on a contributory and non-contributory basis. Employees become eligible for these benefits if they have met certain age and service requirements at retirement, as defined in the plans. Under plan amendments effective late 1998 and early 1999, health care benefits for future retirees were changed to limit employer contributions and medical coverage.

Such benefit costs are accrued over the active service period of employees to the date of full eligibility for the benefits. The net unrecognized transition obligation, resulting from the implementation of accrual accounting, is being amortized over approximately 20 years.

Duke Energy is using an investment account under section 401(h) of the Internal Revenue Code, a retired lives reserve (RLR) and multiple voluntary employees' beneficiary association (VEBA) trusts under section 501(c)(9) of the Internal Revenue Code to partially fund postretirement benefits. The 401(h) vehicle, which provides for tax deductions for contributions and tax-free accumulation of investment income, partially funds postretirement health care benefits. The RLR, which has tax attributes similar to 401(h) funding, partially funds postretirement life insurance obligations. Certain subsidiaries use the VEBA trusts to partially fund accrued postretirement health care benefits and fund postretirement life insurance obligations.

Components of Net Periodic Postretirement Benefit Costs
	For the Years Ended December 31,
(In millions)	1998			1997			1996
Service cost benefit earned during the year	$	10		$	10		$	8
Interest cost on accumulated postretirement    benefit obligation		43			46			44
Expected return on plan assets		(18	)		(19	)		(16	)
Amortization of prior service cost		7			6			1
Amortization of net transition obligation		16			16			18
Recognized net actuarial loss (gain)		1			(1	)		--
Net periodic postretirement benefit costs	$	59		$	58		$	55

Reconciliation of Funded Status to Accrued Postretirement Benefit Costs
	December 31,
(In millions)	1998			1997
Change in Benefit Obligation
Accumulated postretirement benefit obligation    at beginning of year	$	667		$	642
Service cost		10			10
Interest cost		43			46
Plan participants' contributions		6			6
Amendments		(49	)		4
Actuarial (gain) loss		(6	)		4
Benefits paid		(46	)		(45	)
Accumulated postretirement benefit obligation       at end of year	$	625		$	667
Change in Plan Assets
Fair value of plan assets at beginning of year a	$	266		$	225
Actual return on plan assets		34			45
Employer contributions		45			40
Plan participants' contributions		6			1
Benefits paid		(46	)		(45	)
Fair market value of plan assets at end of year a	$	305		$	266
Funded status	$	(320	)	$	(401	)
Unrecognized prior service cost		9			64
Unrecognized net experience (gain) loss		(23	)		4
Unrecognized transition obligation		239			256
Accrued postretirement benefit costs	$	(95	)	$	(77	)
a Principally equity and fixed income securities.

Assumptions Used for Postretirement Benefits Accounting a
(Percent)	1998			1997			1996
Discount rate		6.75			7.25			7.50
Salary increase		4.67			4.33			4.84
Expected long-term rate of return on    401(h) assets		9.25			9.25			9.00
Expected long-term rate of return on    RLR assets		6.75			6.75			6.50
Expected long-term rate of return on    VEBA assets		9.25			9.25			9.50
Assumed tax rate b		39.60			39.60			39.60
a Reflects weighted averages across all plans. b Health care portion of postretirement benefits in VEBA trusts.

For measurement purposes, a 5% weighted average rate of increase in the per capita cost of covered health care benefits was assumed for 1998. The rate was assumed to decrease gradually to 4.75% for 2005 and remain at that level thereafter. Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans.