Duke Energy Transcript re 2nd Qtr Results and Implications for Aggregated Municipalities

(c) F. Bruce Abel

This implies that an arm of Duke stands ready to lower prices to meet competition.



Recently we have seen increased competition in Ohio. The decrease in wholesale power market prices has prompted questions from many of you about customer switching as current market prices are below the standard service offer price in our ESP. Additionally, some of our competitors in Ohio have recently announced intentions to aggressively target customers in Southwestern Ohio.
Historically, our service territory has experienced a lower level of customer switching activity than other areas in Ohio. However, as a result of the competitive pressures I just mentioned, we experienced an uptick in customer switching during the second quarter of 2009.
Overall, the percentage of customers who have switched[Author ID1: at Tue Aug 4 21:47:00 2009
] rose from 4% at the end of the first quarter to 10% as of June 30th, and as of that date, the breakout by customer class was approximately 5% residential, 6% commercial, and 20% industrial. The financial impact of customer switching during the second quarter was not significant.
As competition throughout the state of Ohio intensifies, we are responding to the increased risk of customer switching. Our competitive retail arm, Duke Energy Retail Services, is positioned to help preserve our Ohio native customer base. We are also competing to supply power outside of our service territory. This is evidenced by our recent participation in the FirstEnergy auction. We were the winning bidder of 5% of the retail generation needs of FirstEnergy's Ohio operating companies. We will supply those needs from June 1st, 2009, through May 31st, 2011 at a final wholesale price of $61.50 per megawatt hour.