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Notes to Consolidated Financial Statements for the
Years Ended December 31, 2001, 2000 and 1999

17. STOCK-BASED COMPENSATION

The following information regarding outstanding common stock shares and options reflects the two-for-one common stock split discussed in Note 16.

Duke Energy’s 1998 Long-term Incentive Plan, as amended (the 1998 Plan), reserved 60 million shares of common stock for company performance awards to employees and outside directors. Incentive stock options may only be granted to key employees. Under the 1998 Plan, the exercise price of each option granted cannot be less than the market price of Duke Energy’s common stock on the date of grant. Vesting periods range from one to five years with a maximum term of 10 years.

1.

Summary of Significant Accounting Policies
2.

Business Acquisitions and Dispositions
3.

Business Segments
4.

Regulatory Matters
5. Joint Ownership of Generating Facilities
6. Income Taxes
7. Derivative Instruments, Hedging Activities and Credit Risk
8. Investment in Affiliates and Related Party Transactions
9. Property, Plant and Equipment
10. Debt and Credit Facilities
11. Nuclear Decommissioning Costs
12. Guaranteed Preferred Beneficial Interests in Subordinated Notes of Duke Energy or Subsidiaries
13. Minority Interest Financing
14. Preferred and Preference Stock
15. Commitments and Contingencies
16. Common Stock and Equity Offerings

17.

Stock-Based Compensation
18. Employee Benefit Plans
19. Quarterly Financial Data (Unaudited)
20. Subsequent Event
STOCK OPTION ACTIVITY
Options
(In thousands)		 Weighted-Average
Exercise Price
Outstanding at December 31, 1998 8,923 $ 23
    Granted 10,308 27
    Exercised (856 ) 12
    Forfeited (750 ) 29
Outstanding at December 31, 1999 17,625 25
    Granted 7,594 41
    Exercised (2,047 ) 21
    Forfeited (666 ) 27
Outstanding at December 31, 2000 22,506 31
      Granted   7,090         37  
      Exercised   (2,285 )       25  
      Forfeited   (905 )       33  
  Outstanding at December 31, 2001   26,406         33  


















STOCK OPTIONS AT DECEMBER 31, 2001
Outstanding Exercisable
Range of
Exercise
Prices

Number
(In thousands)

Weighted-Average
Remaining Life
(In years)

Weighted-Average
Exercise
Price

 Number
(In thousands)

Weighted-Average
Exercise
Price
  $5 to $8     21       2.2       $  8       21       $ 8  
$9 to $12     784       2.4       10       784       10  
$13 to $16     168       4.1       14       168       14  
$17 to $22     186       5.1       22       186       22  
$23 to $27     5,278       8.0       25       2,317       25  
$28 to $33     6,565        6.7     29       3,049       29  
$34 to $39     7,236       9.9       38       –       –  
> $39     6,168       9.0       43       1,412       43  
Total     26,406                       7,937       28  


On December 31, 2000, Duke Energy had 5.2 million exercisable options with a $23 weighted-average exercise price. On December 31, 1999, Duke Energy had 3.6 million exercisable options with a $17 weighted-average exercise price.

The weighted-average fair value per option granted was $10 during 2001, $10 during 2000 and $5 during 1999. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option-pricing model.
WEIGHTED-AVERAGE ASSUMPTIONS FOR
OPTION-PRICING		 2001 2000 1999
Stock dividend yield     3.4%     3.7% 4.1%
Expected stock price volatility     29.5%     25.1% 18.8%
Risk-free interest rates     5.0%     5.3% 5.9%
Expected option lives     7 years     7 years 7 years


Duke Energy’s net income for 2001 would have been $1,876 million, or $2.42 per basic share, had compensation expense for stock-based compensation been based on the fair value at the grant dates. Net income for 2000 would have been $1,764 million, or $2.37 per basic share, and 1999 net income would have been $1,498 million, or $2.03 per basic share.

The 1998 Plan allows for a maximum of six million shares of common stock to be issued under restricted stock awards, performance awards and phantom stock awards. Performance awards granted under the 1998 Plan vest over periods from one to seven years. Duke Energy awarded 24,000 shares (fair value of approximately $1 million at grant dates) in 2001, 225,000 shares (fair value of approximately $7 million at grant dates) in 2000 and 986,400 shares (fair value of approximately $26 million at grant dates) in 1999. Compensation expense for the stock grants is charged to earnings over the vesting period, and totaled $6 million in 2001, $7 million in 2000 and $3 million in 1999.

Phantom stock awards granted under the 1998 Plan vest over periods from one to four years. Duke Energy awarded 457,700 shares (fair value of approximately $17 million at grant dates) in 2001 and 168,500 shares (fair value of approximately $7 million at grant dates) in 2000. No phantom stock awards were granted in 1999. Compensation expense for the stock grants is charged to earnings over the vesting period, and totaled $4 million in 2001, and was less than $1 million in 2000. There was no compensation expense for stock grants in 1999.

Duke Energy’s 1996 Stock Incentive Plan (the 1996 Plan) reserved four million shares of common stock for awards to employees. Restricted stock grants under the 1996 Plan vest over periods ranging from one to five years. Duke Energy awarded 124,005 restricted shares (fair value of approximately $5 million at grant dates) in 2001, 294,526 restricted shares (fair value of approximately $8 million at grant dates) in 2000 and 131,700 restricted shares (fair value of approximately $4 million at grant dates) in 1999. Compensation expense for the grants is charged to earnings over the restriction period and totaled $4 million in 2001, $4 million in 2000, and $1 million in 1999.