SHAREHOLDER PROPOSALS

The following two proposals have been submitted by shareholders for inclusion in this proxy statement. Upon oral or written request, we will promptly furnish the names and addresses of the shareholders submitting the proposals, as well as the number of shares they held at the time the proposals were submitted, along with other contact information they have provided to us.

PROPOSAL 4:
Use of Mixed Oxide Fuel in Nuclear Reactors

The Board of Directors recommends a vote AGAINST this shareholder proposal.

Refuse Plutonium Fuel For Duke Reactors

Whereas: Duke Energy is under contract with the Department of Energy (DOE) to use plutonium fuel (MOX) in the McGuire and Catawba nuclear reactors. Whereas: Duke shareholders are concerned about the impact of plutonium fuel on the safe, efficient and economic operation of the company for the following reasons:

1. Economic dividends from this program are small, speculative, far in the future and not worth the risks to reactor safety or company reputation.
2. Growing public and legislative opposition creates a bad public relations image for our company during a time of utility deregulation and growing competition.
3. Weapons grade plutonium has never been used in commercial nuclear reactors posing unanticipated risks. European experience with reactor grade plutonium fuel has produced inadequate information of unknown relevance to the U.S. weapons grade plutonium fuel program.
4. Uranium fuel is plentiful and inexpensive, with predictable impacts on reactor operations. Plutonium fuel introduces differences in reactor physics which increase accident risks and increases cancer deaths from serious accidents by as much as 25%.
5. Duke Energy participation in this plutonium fuel program would make the company dependent on the Department of Energy and the French government owned firm Cogema. The difficulties and red tape involved in doing business with these two government agencies make the business dynamics of this venture risky.
6. The plutonium fuel program depends on the Russian government doing a parallel program. Duke Energy should not involve itself in a program that depends on political events in Russia.
7. Use of plutonium fuel sends the message that plutonium is acceptable for use in other countries, thus increasing the risk of nuclear weapons material proliferation.
8. Plutonium fuel use would require amending the operating licenses of the nuclear reactors in a process that could be expensive, time consuming and possibly unsuccessful.
9. The Department of Energy is also planning to immobilize some of the plutonium by mixing it with nuclear waste and encasing it in glass or ceramics. The immobilization option is faster, safer, cheaper and does not promote nuclear materials proliferation. Duke shareholders should promote this better option for plutonium disposal. There is no need for Duke Energy to use the unproven weapons plutonium fuel.

THEREFORE BE IT RESOLVED THAT the shareholders of Duke Energy require the Board of Directors to establish a firm policy against the use of plutonium (MOX) fuel. We urge all shareholders to please vote FOR this resolution.

Opposing Statement of the Board of Directors

This proposal was submitted for consideration at our 1999 annual meeting and was defeated, with 92.4% voting against and 7.6% voting in favor.

With this overwhelming shareholder support and the Board of Directors’ confidence that it is in the best interests of Duke Energy, we began working in 1999 with a team of companies on the Mixed Oxide (MOX) Fuel Project, a government initiative to dispose of plutonium from United States nuclear weapons that are surplus to defense needs. The project involves fabricating the plutonium into MOX fuel and using the fuel in existing commercial nuclear reactors. Using the plutonium as MOX fuel destroys much of the material and renders the remainder unattractive for re-use in nuclear weapons, while producing electricity as a useful byproduct. Duke Energy is scheduled to begin using MOX fuel in the McGuire and Catawba Nuclear Stations in 2007.

In parallel with the U.S. project, Russia will also be fabricating MOX fuel and using it in Russian reactors to dispose of its surplus plutonium. The fundamental goal of the overall program is to reduce the amount of weapons-usable plutonium in Russia, where it is particularly vulnerable to theft or diversion. Since Russia has clearly indicated that it will not dispose of its surplus plutonium unless the U.S. does likewise, the U.S. project and Duke Energy’s participation in it are crucial to achievement of that goal. This program has received widespread bipartisan support in the U.S., as well as international endorsement.

The government is paying Duke Energy and its subsidiary, Duke Engineering & Services, for the ongoing preparatory work. Once McGuire and Catawba begin using MOX fuel, Duke Energy will receive the fuel at a lower cost than would be incurred for the equivalent energy content of uranium fuel. Accordingly, by participating in the MOX Fuel Project, Duke Energy will realize direct economic benefits through lower nuclear fuel costs. Specific details on the price of the MOX fuel and the resulting fuel cost savings, like all nuclear fuel contract information, are sensitive and confidential.

MOX fuel use is a proven technology, the feasibility of which has been recognized by the National Academy of Sciences, among others. European reactors have been using MOX fuel safely and efficiently for decades. Before using MOX fuel at McGuire and Catawba, Duke Energy is required to demonstrate to the satisfaction of the U.S. Nuclear Regulatory Commission that using the fuel poses no undue risk to the health and safety of the public.

In summary, MOX fuel is a technology that has been proven through many years of French, German, Belgian and Swiss experience in reactors very similar to McGuire and Catawba. Participation in the MOX Fuel Project does not impose undue financial risk on Duke Energy, and will enable Duke Energy to save money on long-term nuclear fuel costs. In addition, the project supports a key U.S. government nonproliferation initiative, and thereby holds the potential of making the world safer and more secure.

The shareholder proposal seeks to prevent Duke Energy from pursuing these benefits and achieving these important goals. The Board of Directors therefore recommends a vote AGAINST this shareholder proposal.

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