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Mary Hain
11/28/2000 08:41 AM
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Richter/HOU/ECT@ECT, Stewart Rosman/HOU/ECT@ECT, Greg Wolfe@ECT, Sean 
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Mark Fischer/PDX/ECT@ECT, Matt Motley/PDX/ECT@ECT, Christopher F 
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Subject: Duke Energy Proposes to Manage All of SDG&E's Electricity Needs For 
Next Five Years at Low Fixed Pri

Monday November 27, 2:19 pm Eastern Time

Press Release

SOURCE: Duke Energy Corporation

Duke Energy Proposes to Manage All of SDG&E's Electricity Needs For Next Five 
Years at Low Fixed Price

MORRO BAY, Calif., Nov. 27 /PRNewswire/ -- Duke Energy (NYSE: DUK - news), 
through its business unit Duke Energy North America (DENA), has put forth 
another bold solution to California's electricity crisis by proposing to 
manage San Diego Gas & Electric's (SDG&E) 3,300-megawatt electricity load at 
a fixed price of 6 cents per kilowatt-hour for the next five years. This 
proposal is based on market prices for electricity and natural gas as of Nov. 
17, 2000.

DENA's proposal, which takes into account SDG&E's seasonal and hourly load 
requirements and has a 3-percent annual adjustment for inflation, was 
included in comments DENA submitted to the Federal Energy Regulatory 
Commission last week in response to the commission's proposed remedies for 
California's electricity market.

Under DENA's proposal, SDG&E's business and residential customers no longer 
would be exposed to the electricity price spikes they experienced this past 
summer when their retail electricity prices often exceeded 18 cents per 
kilowatt-hour.

``The 3,300 megawatts represent the full electricity load SDG&E needs to 
serve its retail customer base during the hottest summer day,'' said Jeff 
Stokes, DENA executive vice president for the Western region. ``We again have 
stepped up with tangible, market-based solutions that can be implemented to 
address the San Diego area's electricity price spikes. In addition to 
stabilizing customers' power bills, our proposal would also eliminate SDG&E's 
exposure to high wholesale electricity prices and the financial uncertainty 
that goes along with that exposure.''

California is facing high wholesale electricity prices largely because of 
supply and demand imbalance, which has caused the California Independent 
System Operator (Cal-ISO) to call an unprecedented 20 ``Stage Two Electrical 
Emergencies'' thus far in 2000 when available electricity supplies have 
fallen below 5 percent. The primary causes for the electricity supply 
shortfall are the state's economic growth, the lack of new power plants being 
built in California over the past decade, an aging generation fleet that 
requires more maintenance and electricity imports being less available due to 
economic growth throughout the West. California's electricity supply and 
demand imbalance is expected to worsen or show little improvement until the 
summers of 2002 and 2003, which is the earliest a substantial amount of new, 
more efficient and cleaner power plants can be brought on line.

``This is another key market-based solution to California's electricity 
crisis made by Duke Energy over the past four months and we hope that it is 
given serious consideration,'' said Bill Hall, DENA vice president of asset 
management for the Western region. ``The competitive wholesale electricity 
markets did not cause this electricity crisis; but with patience, wisdom and 
bold behavior by all market participants, we can fix the crisis and not 
burden the state's electricity ratepayers or taxpayers.''

DENA has taken the following steps recently to address California's 
electricity shortfall and high prices:


    * On Nov. 16, DENA broke ground on its $525-million modernization of Moss
      Landing Power Plant in Monterey County to upgrade the existing plant and
      add 1,060 megawatts of new capacity to the site's current 1,500
      megawatts.  When the modernization is completed, the plant will be
      California's largest.  The project represents a substantial portion of
      the new generation scheduled to come on line in California during summer
      2002.

    * On Nov. 15, DENA signed a wholesale electricity contract with Southern
      California Edison to help manage price volatility and prevent price
      spikes for their retail customers.  This followed a similar contract
      that was signed with Pacific Gas & Electric on Oct. 30.  The specific
      prices of the contracts are proprietary.

    * On Oct. 23, DENA refiled with the California Energy Commission its
      2,500-page application for certification to modernize the 1,000-megawatt
      Morro Bay Power Plant.  The new 1,200-megawatt facility represents a
      $600-million investment.  If the certification is received, DENA expects
      to bring the new plant on line by summer 2003 and demolish the existing
      plant by 2007.

    * Finally, DENA has begun to work with City of Chula Vista officials to
      accelerate the schedule for replacing the South Bay Power Plant with a
      cleaner and more efficient facility.  Existing plans call for the plant
      to be replaced in 2009.


For more information about DENA's California operations, power plant 
modernization plans and position on California's electricity crisis, see the 
Web site www.duke-energy.com/California.

DENA is a leading wholesale energy services company. DENA and its affiliates 
including Duke Energy Trading and Marketing provide natural gas and power 
supply and services and risk management products to wholesale energy 
producers and users. DENA also develops, owns and manages a portfolio of 
merchant generation facilities. DENA is a wholly owned subsidiary of Duke 
Energy.

Duke Energy, a diversified multinational energy company, creates value for 
customers and shareholders through an integrated network of energy assets and 
expertise. Duke Energy manages a dynamic portfolio of natural gas and 
electric supply, delivery and trading businesses -- generating revenues of 
nearly $22 billion in 1999. Duke Energy, headquartered in Charlotte, N.C., is 
a Fortune 100 company traded on the New York Stock Exchange under the symbol 
DUK. More information about the company is available on the Internet at: 
www.duke-energy.com.

    CONTACT:  Tom Williams of Duke Energy Corporation, 805-595-4270, or
              pager, 877-364-5170

SOURCE: Duke Energy Corporation