UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.              )

526 South Church Street
Charlotte, NC 28202-1802

April 5, 2007

Dear Shareholder:

I am pleased to invite you to our annual meeting to be held on May 10, 2007, in the O. J. Miller Auditorium located in our Charlotte headquarters building.

As explained in the enclosed proxy statement, at this year’s meeting you will be asked to vote for the election of directors, to ratify the selection of the independent public accountant and consider any other business that may properly come before the meeting.

It is important that all Duke Energy shareholders, regardless of the number of shares owned, participate in the affairs of the Company. At Duke Energy’s last annual meeting, in October 2006, over 87 percent of Duke Energy’s shares were represented in person or by proxy.

Even if you plan to attend this year’s meeting, it is a good idea to vote your shares now before the meeting, in the event your plans change. You may mark, date and sign the proxy card and return it using the enclosed, postage-paid envelope. Alternatively, you may also vote by telephone or the Internet. Please follow the voting instructions that are printed on your enclosed proxy card.

Whether you choose to vote by telephone, Internet or mail, your response is greatly appreciated.

We hope you will find it possible to attend this year’s meeting, and thank you for your continued interest in Duke Energy.

Duke Energy Corporation
526 South Church Street
Charlotte, NC 28202-1802

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 10, 2007

April 5, 2007

We will convene the annual meeting of shareholders of Duke Energy Corporation on Thursday, May 10, 2007, at 10:00 a.m. in the O. J. Miller Auditorium in the Energy Center located at 526 South Church Street in Charlotte, North Carolina.

The purpose of the annual meeting is to consider and take action on the following:

1.                             Election of directors;

2.                             Ratification of Deloitte & Touche LLP as Duke Energy’s independent public accountant for 2007; and

3.                             Transact any other business that may properly come before the meeting (or any adjournment or postponement of the meeting).

Shareholders of record as of the close of business on March 26, 2007, are entitled to vote at the annual meeting. It is important that your shares be represented at this meeting.

Whether or not you expect to be present at the annual meeting, please vote by marking, dating and signing the enclosed proxy card and return it using the enclosed, postage-paid envelope. You may also vote by telephone or Internet. Please follow the voting instructions that are printed on your enclosed proxy card. Regardless of the manner in which you vote, we urge and greatly appreciate your prompt response.

TABLE OF CONTENTS

COMMONLY ASKED QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

2

3

4

PROPOSAL 1: ELECTION OF DIRECTORS

The Board of Directors

The Board of Directors of Duke Energy currently consists of 10 members. We have a declassified Board of Directors, which means all of the directors are voted on every year at the annual meeting. As of December 31, 2006, we had 15 members on our Board of Directors. However, effective January 2, 2007, in connection with the creation of Spectra Energy Corp (Spectra Energy) and the spin-off of our gas businesses, 5 directors resigned to become directors of Spectra Energy. The 5 directors are Roger Agnelli, Paul M. Anderson, William T. Esrey, Dennis R. Hendrix and Michael E.J. Phelps.

The Corporate Governance Committee, comprised of only independent directors has recommended the following candidates as nominees for directors and the Board of Directors has approved their nomination for election:

William Barnet, III, G. Alex Bernhardt, Sr., Michael G. Browning, Phillip R. Cox, Ann Maynard Gray, James H. Hance, Jr., James T. Rhodes, James E. Rogers, Mary L. Schapiro and Dudley S. Taft.

If any director is unable to stand for election, the Board of Directors may reduce the number of directors or designate a substitute. In that case, shares represented by proxies may be voted for a substitute director. We do not expect that any nominee will be unavailable or unable to serve.

5

6

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” EACH NOMINEE.

7

INFORMATION ON THE BOARD OF DIRECTORS

Board Meetings and Attendance

The Board of Directors of the Company met 8 times during 2006. No director attended less than 75% of the total of the Board meetings and the meetings of the committees upon which he or she served. Ann Maynard Gray was appointed as lead director on April 3, 2006. The lead director is responsible for presiding at Board meetings when the Chairman is not present, presiding at executive sessions of the nonmanagement directors, assisting in developing the Board agenda in collaboration with the Chairman, calling special meetings of the Board of Directors, and serving as a liaison between the independent directors and the Chairman and the Chief Executive Officer. Directors are encouraged to attend the annual meeting of shareholders. Fourteen of 15 directors attended Duke Energy’s last annual meeting of shareholders on October 24, 2006.

Independence of Directors

The Board of Directors may determine a director to be independent if the Board has affirmatively determined that the director has no material relationship with Duke Energy or its subsidiaries (references in this proxy statement to Duke Energy’s subsidiaries shall mean its consolidated subsidiaries), either directly or as a shareholder, director, officer or employee of an organization that has a relationship with Duke Energy or its subsidiaries. Independence determinations will be made on an annual basis at the time the Board of Directors approves director nominees for inclusion in the annual proxy statement and, if a director joins the Board between annual meetings, at such time.

The Board of Directors has determined that none of the directors, other than Mr. Rogers, has a material relationship with Duke Energy or its subsidiaries, and are, therefore, independent under the listing standards of the New York Stock Exchange. In reaching this conclusion, the Board of Directors considered all transactions and relationships between each director or any member of his or her immediate family and Duke Energy and its subsidiaries.

To assist in this determination, the Board of Directors adopted the following categorical standards for relationships that are deemed not to impair a director’s independence:

8

9

*                                  An “associated” company or charity is one (a) for which the director or immediate family member is an officer, director, advisory board member, trustee, general partner, principal or employee, or (b) of which the director and immediate family members together own more than 5%.

For purposes of these standards, immediate family members include a director’s spouse, parents, children, siblings, mothers- and fathers-in-law, sons- and daughters-in-law, brothers-and sisters-in-law, and anyone (other than domestic employees) who shares the director’s home. For purposes of the contribution relationship described under “Charitable Relationships” above, payments exclude amounts contributed or pledged to match employee contributions or pledges.

Board Committees

The Board of Directors has the five standing committees described below:

·               The Audit Committee selects and retains a firm of independent public accountants to conduct audits of the accounts of Duke Energy and its subsidiaries. It also reviews with the independent public accountants the scope and results of their audits, as well as the accounting procedures, internal controls, and accounting and financial reporting policies and practices of Duke Energy and its subsidiaries, and makes reports and recommendations to the Board as it deems appropriate. The Audit Committee is responsible for approving all audit and permissible non-audit services provided to Duke Energy by its independent public accountants. Pursuant to this responsibility, the Audit Committee adopted the policy on Engaging External Auditor for Services which provides that the Committee will annually establish detailed services and related fee levels that may be provided by the independent public accountants. See “Independent Public Accountants” on page 16 for additional information on the Audit Committee’s pre-approval policy.

The Board has determined that Ms. Mary L. Schapiro and Mr. James T. Rhodes are “audit committee financial experts” as such term is defined in Item 401(h) of Regulation S-K. See above for a description of their business experience.

This Committee met 14 times in 2006. Following the merger of Duke Energy and Cinergy, during 2006, the Audit Committee members were Messrs. Phillip R. Cox (Chair), William Barnet, III, G. Alex Bernhardt, Sr., William T. Esrey and James T. Rhodes and Ms. Mary L. Schapiro. Each of these members has been determined to be “independent” within the meaning of Sections 303A.02, 303A.06 and 303A.07 of the NYSE’s listing standards and Rule 10A-3 of the Securities Exchange Act of 1934 and the company’s categorical standards for independence. In addition, each of these members meet the expertise requirements for audit committee membership under the NYSE’s rules and the rules and regulations of the SEC.

·              The Compensation Committee establishes and reviews the overall compensation philosophy, reviews and approves the salaries and other compensation of certain employees, including all executive officers of Duke Energy, reviews and approves compensatory agreements with executive officers, approves equity grants and reviews the effectiveness of, and approves changes to, the compensation program. This Committee also makes recommendations to the Board of Directors on compensation for outside directors.

10

This Committee met 8 times in 2006. Following the merger of Duke Energy and Cinergy, during 2006, the Compensation Committee members were Messrs. James H. Hance, Jr. (Chair), Roger Agnelli, Dennis R. Hendrix and Dudley S. Taft and Ms. Ann Maynard Gray. Each of these members has been determined to be a “non-employee director” within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 and “independent” within the meaning of Section 303A.02 of the NYSE’s listing standards and the company’s categorical standards for independence.

·               The Corporate Governance Committee considers matters related to corporate governance and formulates and periodically revises governance principles. It recommends the size and composition of the Board of Directors and its committees and recommends potential successors to the Chief Executive Officer. This committee also recommends to the Board the slate of nominees, including any nominees recommended by shareholders, for director for each year’s annual meeting and, when vacancies occur, names of individuals who would make suitable directors of Duke Energy. This committee may engage an external search firm or third party to identify or evaluate or to assist in identifying or evaluating a potential nominee. The Committee also performs an annual evaluation of the performance of the Chief Executive Officer with input from the full Board of Directors.

This Committee met 5 times in 2006. Following the merger of Duke Energy and Cinergy, during 2006, the Corporate Governance Committee members were Ms. Ann Maynard Gray (Chair) and Messrs. Michael G. Browning, William T. Esrey, Dennis R. Hendrix and Michael E.J. Phelps and Ms. Mary L. Schapiro. Each of these members has been determined to be “independent” within the meaning of Section 303A.02 of the NYSE’s listing standards and the company’s categorical standards for independence.

·               The Finance and Risk Management Committee reviews Duke Energy’s financial and fiscal affairs and makes recommendations to the Board of Directors regarding dividends, financing and fiscal policies. It reviews the financial exposure of Duke Energy, as well as mitigating strategies, reviews Duke Energy’s risk exposure as related to overall company portfolio and impact on earnings and reviews the financial impacts of major transactions as related to mergers, acquisitions, reorganizations and divestitures.

This Committee met 7 times in 2006. Following the merger of Duke Energy and Cinergy, during 2006, the Finance and Risk Management Committee members were Messrs. Michael E.J. Phelps (Chair), Roger Agnelli, James H. Hance, Jr. and Dennis R. Hendrix and Ms. Ann Maynard Gray.

·               The Nuclear Oversight Committee provides oversight of the nuclear safety, operational and financial performance, and long-term plans and strategies of Duke Energy’s nuclear power program. The oversight role is one of review, observation and comment and in no way alters management authority, responsibility or accountability.

This Committee met 5 times in 2006. Following the merger of Duke Energy and Cinergy, during 2006, the Nuclear Oversight Committee members were Dr. James T. Rhodes (Chair) and Messrs. William Barnet, III, G. Alex Bernhardt, Sr., Michael G. Browning and Dudley S. Taft.

11

Each committee operates under a written charter adopted by the Board of Directors. The charters are posted on our website at www.duke-energy.com/investors/corporate and are available in print to any shareholder upon request.

Board Committee Membership Roster (as of March 14, 2007)

Ÿ                                   Committee Chair

Directors’ Compensation

Annual Retainer and Fees.   Effective as of the April 3, 2006 consummation of the merger with Cinergy, the retainer and meeting fees paid to our outside directors consisted of:

Annual Stock Retainer for 2006.   In 2006, each director received the portion of his or her annual retainer that was payable in stock in the form of 2,600 phantom shares. The phantom shares were granted under the Duke Energy Corporation 1998 Long-Term Incentive Plan (for individuals who were on the board of Duke Energy prior to the merger with Cinergy) or the Cinergy Corp. 1996 Long-

12

Term Incentive Compensation Plan (for individuals who were on the board of Cinergy prior to the merger of Duke Energy and Cinergy), and vest on the first anniversary of the merger of Duke Energy and Cinergy.

Deferral Plans and Stock Purchases.   Generally, directors may elect to receive all or a portion of their annual compensation, consisting of retainers and attendance fees, on a current basis, or defer such compensation under the Duke Energy Corporation Directors’ Savings Plan. Up to 50% of annual cash compensation may also be received on a current basis in the form of Duke Energy common stock. Deferred amounts are credited to an unfunded account for the director’s benefit, the balance of which is adjusted for the performance of phantom investment options, including the Duke Energy common stock fund, as elected by the director. Each outside director will receive deferred amounts credited to his or her account generally following termination of his or her service from the Board of Directors, in accordance with his or her distribution elections.

Charitable Giving Program.   Duke Energy maintains a Directors’ Charitable Giving Program under which certain of our current directors remain eligible. Eligibility for this program has been frozen and no director who is not currently eligible may become eligible in the future. Under this program, the Duke Energy Foundation will make, upon the director’s death, donations of up to $1,000,000 to charitable organizations selected by the director. A director may request that donations be made under this program during the director’s lifetime, in which case the maximum donation will be reduced on an actuarially-determined net present value basis. In 2006, a donation of $422,900 was made by Duke Energy to a charitable organization at the request of Mr. G. Alex Bernhardt, Sr. Duke Energy maintains life insurance policies upon eligible directors to fund donations under the program. Eligible directors include only those who were members of the Board of Directors of Duke Energy on February 18, 1998, and certain former directors who previously qualified for this benefit. In addition, Duke Energy maintains The Duke Energy Foundation Matching Gifts Program under which directors (and employees) are eligible for matching contributions of up to $5,000 per director per calendar year to qualifying institutions.

Expense Reimbursement and Insurance.   Duke Energy provides travel insurance to directors and reimburses directors for expenses reasonably incurred in connection with attendance and participation at Board and Committee meetings and special functions.

Gifts.   Duke Energy presented a holiday gift in 2006 to each director on the Board as of December 31, 2006, including Messrs. Anderson and Rogers. The aggregate cost of all the gifts was approximately $5,177.

Stock Ownership Guidelines.   Outside directors are subject to stock ownership guidelines which establish a target level of ownership of Duke Energy common stock (or common stock equivalents) of 4,000 shares. At the end of 2006, the targeted ownership level had been met by all but one director who, having joined the Board of Directors in 2004 has until 2009 to meet the target level. As of the date of this proxy statement, all individuals who are currently on the Board of Directors have met the targeted ownership level.

13

The following table describes the compensation earned during 2006 by each individual who served as an outside director during 2006.

DIRECTOR COMPENSATION

(1)                         Max Lennon and James G. Martin retired from the Board of Directors of Duke Energy on March 31, 2006. Effective April 3, 2006, the following individuals were appointed to the Board of Directors of Duke Energy in connection with the merger with Cinergy: Michael G. Browning, Phillip R. Cox, James E. Rogers, Mary L. Schapiro and Dudley S. Taft. In connection with the spin-off of Spectra Energy, Roger Agnelli, Paul M. Anderson, William T. Esrey, Dennis R. Hendrix and Michael E.J. Phelps resigned from the Board of Directors effective January 2, 2007 to become directors of Spectra Energy. Paul M. Anderson and James E. Rogers were employed by Duke Energy during 2006 and therefore did not receive compensation for serving as members of the Duke Energy Board of Directors.

(2)                         These columns reflect the aggregate dollar amount recognized for financial statement reporting purposes for 2006 with respect to outstanding phantom share awards and option awards, and include amounts attributable to awards granted in prior years. The aggregate dollar amount was determined in accordance with the provision of Statement of Financial Accounting Standards (SFAS) No. 123R, Share-Based Payments (FAS 123R), but without regard to any estimate of forfeitures related to a service-based vesting condition. See Note 20 of the consolidated financial statements in Duke Energy’s Form 10-K as filed with the SEC for the year ended December 31, 2006 regarding assumptions underlying valuation of equity awards. The full grant date fair value of the phantom shares granted to each director during 2006, computed in accordance with FAS 123R, is $28.30. As of December 31, 2006, the aggregate number of option awards outstanding for each director was as follows: Mr. Agnelli: 0; Mr. Barnet: 0; Mr. Bernhardt: 19,600; Mr. Browning: 0; Mr. Cox: 0; Mr. Esrey: 19,600; Ms. Gray: 19,600; Mr. Hance: 0; Mr. Hendrix: 8,000; Dr. Lennon: 19,600; Mr. Martin: 13,000; Mr. Phelps: 4,000; Dr. Rhodes: 8,000; Ms. Schapiro: 35,100; and Mr. Taft: 15,600. As of December 31, 2006, the aggregate number of unvested phantom share awards outstanding for each director was as

14

follows: Mr. Agnelli: 4,488; Mr. Barnet: 2,600; Mr. Bernhardt: 5,928; Mr. Browning: 2,600; Mr. Cox: 2,600; Mr. Esrey: 5,928; Ms. Gray: 5,928; Mr. Hance: 2,600; Mr. Hendrix: 4,488; Dr. Lennon: 0; Mr. Martin: 0; Mr. Phelps: 5,928; Dr. Rhodes: 5,928; Ms. Schapiro: 2,600; and Mr. Taft: 2,600.

(3)                         Includes above-market interest earned on a grandfathered investment fund previously provided under a predecessor plan to the Duke Energy Corporation Directors’ Savings Plan. Participants can no longer defer compensation into the grandfathered investment fund, but continue to be credited with interest at the fixed rate on amounts previously deferred to such fund.

(4)                         As described in the following table, All Other Compensation for 2006 includes matching gift contributions made by the Duke Energy Foundation in the director’s name to a charitable organization, charitable contributions made in the director’s name pursuant to the legacy Duke Energy Corporation Charitable Giving Program, a business travel accident insurance premium of $2,296 that was prorated among the directors based on their actual service on the Duke Energy Board of Directors during 2006 and a holiday gift.

15

PROPOSAL 2: RATIFICATION OF DELOITTE & TOUCHE LLP
AS DUKE ENERGY’S INDEPENDENT PUBLIC ACCOUNTANT
FOR 2007

Independent Public Accountants

Representatives of Deloitte are expected to be present at the annual meeting. They will have an opportunity to make a statement, if they desire to do so, and will be available to respond to appropriate questions. Information on Deloitte’s fees for services rendered in 2005 and 2006 follows.

(a)                         Audit Fees are fees billed or expected to be billed by Deloitte for professional services for the audit of Duke Energy’s consolidated financial statements included in Duke Energy’s annual report on Form 10-K and review of financial statements included in Duke Energy’s quarterly reports on Form 10-Q, services that are normally provided by Deloitte in connection with statutory, regulatory or other filings or engagements or any other service performed by Deloitte to comply with generally accepted auditing standards and include comfort and consent letters in connection with SEC filings and financing transactions.

(b)                        Audit-Related Fees are fees billed by Deloitte for assurance and related services that are reasonably related to the performance of an audit or review of Duke Energy’s financial statements, including assistance with acquisitions and divestitures, internal control reviews, employee benefit plan audits and general assistance with the implementation of the SEC rules pursuant to the Sarbanes-Oxley Act.

(c)                         Tax Fees are fees billed by Deloitte for tax return assistance and preparation, tax examination assistance, and professional services related to tax planning and tax strategy.

(d)                        All Other Fees are fees billed by Deloitte for any services not included in the first three categories, primarily translation of audited financials into foreign languages, accounting training and conferences.

To safeguard the continued independence of the independent public accountant, the Audit Committee adopted a policy that provides that the independent public accountants are only permitted to provide services to Duke Energy and its subsidiaries that have been pre-approved by the Audit Committee. Pursuant to the policy, detailed audit services, audit-related services, tax services and certain other services have been specifically pre-approved up to certain fee limits. In the event that the

16

cost of any of these services may exceed the pre-approved limits, the Audit Committee must pre-approve the service. All other services that are not prohibited pursuant to the SEC’s or other applicable regulatory bodies’ rules or regulations must be specifically pre-approved by the Audit Committee. All services performed in 2006 by the independent public accountant were approved by the Audit Committee pursuant to its pre-approval policy.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF DELOITTE & TOUCHE LLP AS DUKE ENERGY’S INDEPENDENT PUBLIC ACCOUNTANT FOR 2007.

17

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table indicates the amount of Duke Energy common stock beneficially owned by the directors, the executive officers listed in the Summary Compensation Table under “Executive Compensation” below (referred to as the Named Executive Officers), and by all directors and executive officers as a group as of March 14, 2007.

*                                 Represents less than 1%.

(1)                         Includes the following number of shares with respect to which directors and executive officers have the right to acquire beneficial ownership within sixty days of March 14 2007: P.M. Anderson – 1,100,000; W. Barnet, III – 37; G.A. Bernhardt, Sr. – 18,800; M.G. Browning – 5,449; P.R. Cox – 5,449; F.J. Fowler – 1,065,715; A.M. Gray – 48,165; J.H. Hance, Jr. – 0; D.L. Hauser – 197,215; T.C. O’Connor – 86,400; J.T. Rhodes – 8,547; J.E. Rogers – 216,216; M.L. Schapiro – 35,560; R.G. Shaw – 618,100; D.S. Taft – 15,600; and all directors and executive officers as a group – 4,116,259.

18

The following table lists the beneficial owners of 5% or more of Duke Energy’s outstanding shares of common stock as of December 31, 2006. This information is based on the most recently available reports filed with the SEC and provided to us by the companies listed.

(1)                         According to the Schedule 13G filed by State Street Bank and Trust Company, these shares are beneficially owned by its clients, and State Street Bank and Trust Company has sole voting power with respect to 39,789,779 shares, shared voting power with respect to 52,614,122 shares, and sole dispositive power with respect to all of these shares.

19

REPORT OF THE AUDIT COMMITTEE

The following is the report of the Audit Committee with respect to Duke Energy’s audited financial statements for the fiscal year ended December 31, 2006.

The purpose of the Audit Committee is to assist the Board in its general oversight of Duke Energy’s financial reporting, internal controls and audit functions. The Audit Committee Charter describes in greater detail the full responsibilities of the Committee and is available on our website at www.duke-energy.com/investors/governance.

The Audit Committee has reviewed and discussed the consolidated financial statements with management and Deloitte & Touche LLP (“Deloitte”), the Company’s independent public accountants. Management is responsible for the preparation, presentation and integrity of Duke Energy’s financial statements; accounting and financial reporting principles; establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)); establishing and maintaining internal control over financial reporting (as defined in Exchange Act Rule 13a-15(f)); evaluating the effectiveness of disclosure controls and procedures; evaluating the effectiveness of internal control over financial reporting; and, evaluating any change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting. Deloitte is responsible for performing an independent audit of the consolidated financial statements and expressing an opinion on the conformity of those financial statements with accounting principles generally accepted in the United States, as well as expressing an opinion on (i) management’s assessment of the effectiveness of internal control over financial reporting and (ii) the effectiveness of internal control over financial reporting.

We reviewed the Company’s audited financial statements with management and Deloitte, and met separately with both management and Deloitte to discuss and review those financial statements and reports prior to issuance. These discussions also addressed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments, and the clarity of disclosures in the financial statements. Management has represented, and Deloitte has confirmed, that the financial statements were prepared in accordance with generally accepted accounting principles.

In addition, management completed the documentation, testing and evaluation of Duke Energy’s system of internal control over financial reporting in response to the requirements set forth in Section 404 of the Sarbanes-Oxley Act of 2002 and related regulations. The Audit Committee was kept apprised of the progress of the evaluation and provided oversight and advice to management during the process. In connection with this oversight, the Audit Committee received periodic updates provided by management and Deloitte at each regularly scheduled Committee meeting. At the conclusion of the process, management provided the Audit Committee with, and the Audit Committee reviewed, a report on the effectiveness of the Company’s internal control over financial reporting. The Audit Committee also reviewed the report of management contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006 (“Form 10-K”) filed with the SEC, as well as Deloitte’s Report of Independent Registered Public Accounting Firm included in the Company’s Form 10-K related to its audit of (i) the consolidated financial statements and financial statement schedule, (ii) management’s assessment of the effectiveness of internal control over financial

20

reporting, and (iii) the effectiveness of internal control over financial reporting. The Audit Committee continues to oversee the Company’s efforts related to its internal control over financial reporting and management’s preparations for the evaluation in fiscal 2007.

The Audit Committee has discussed with Deloitte the matters required to be discussed by Statement on Auditing Standards No. 61, as amended, “Communication with Audit Committees” and PCAOB Auditing Standard No. 2, “An Audit of Internal Control Over Financial Reporting Performed in Conjunction with an Audit of Financial Statements.” In addition, Deloitte has provided the Audit Committee with the written disclosures and the letter required by the Independence Standards Board Standard No. 1, as amended, “Independence Discussions with Audit Committees,” that relates to Deloitte’s independence from Duke Energy and its subsidiaries and the Audit Committee has discussed with Deloitte the firm’s independence.

Based on its review of the consolidated financial statements and discussions with and representations from management and Deloitte referred to above, the Audit Committee recommended to the Board of Directors that the audited financial statements be included in Duke Energy’s Form 10-K, for filing with the SEC.

21

REPORT OF THE COMPENSATION COMMITTEE

The Compensation Committee of Duke Energy has reviewed and discussed the Compensation Discussion and Analysis with management and, based on such review and discussions, the Compensation Committee recommended to the Board that the Compensation Discussion and Analysis be included in the Duke Energy 2006 Form 10-K and this Proxy Statement.

22

COMPENSATION DISCUSSION AND ANALYSIS

The purpose of this Compensation Discussion and Analysis is to provide information about Duke Energy’s compensation objectives and policies for the named executive officers and give context for the numbers and narrative descriptions that follow. As the Compensation Committee of the Board of Directors of Duke Energy (the “Committee”) is responsible for making the compensation decisions for Duke Energy’s executive officers, including the named executive officers, the discussion begins with a brief overview of the Committee and its processes, and then proceeds to outline the objectives and details of Duke Energy’s compensation program.

Committee Overview

The Committee is comprised entirely of non-employee directors, each of whom is considered to be “independent” under the currently applicable listing standards of the New York Stock Exchange, to be a “non-employee director” within the meaning of Rule 16b-3 under the Securities and Exchange Act of 1934, as amended, and to be an “outside director” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended. Currently, the Committee members are Ms. Ann Maynard Gray and Messrs. James H. Hance, Jr. (Chair), Michael G. Browning and Dudley S. Taft.

The Committee operates under a written charter adopted by the full Board, which is available at www.duke-energy.com/investors/governance. The fundamental responsibilities of the Committee are to: (1) establish and review the overall compensation philosophy of Duke Energy; (2) review and approve the annual salary, short-term incentive opportunities, long-term incentive opportunities, and other benefits of the Chief Executive Officer and other executive officers; (3) review and approve any employment or severance agreement entered into with an executive officer; (4) approve equity grants under Duke Energy’s long-term incentive plan; (5) review the effectiveness of Duke Energy’s compensation program in obtaining desired results and approve any changes thereto; and (6) review and recommend to the full Board the compensation of non-employee directors.

Committee Meetings

The Committee meets as often as is necessary to perform its duties and responsibilities. The Committee’s Chair collaborates with management to establish the meeting agenda. The Committee receives and reviews materials in advance of each meeting. These materials include information that management believes will be helpful to the Committee as well as materials the Committee has specifically requested. Depending on the agenda for a particular meeting, these materials may include such things as information relating to: (1) the competitiveness of executive and/or director compensation programs based on market data; (2) the total compensation provided to executives; (3) trends in compensation and/or benefits; (4) executive and director stock ownership levels; and (5) corporate and individual performance compared to predetermined objectives.

In 2006, the Committee met 8 times, and the Committee has met 4 times so far during fiscal 2007.

23

Committee Advisors

The Compensation Committee Charter grants the Committee authority to engage advisors and compensation consultants. In this regard, the Committee has engaged Frederic W. Cook & Company, Inc. to report directly to the Committee as its independent consultant. Frederic W. Cook & Company, Inc. provides various services in this capacity, including, but not limited to, providing advice on best practices and analysis of meeting materials prepared by management. A representative of Frederic W. Cook & Company, Inc. generally attends each Committee meeting.

Committee Effectiveness

As required in its charter, the Committee reviews its performance annually. Based on the results of this self-evaluation, the Committee modifies its procedures to improve its effectiveness.

Management’s Role in the Compensation-Setting Process

The most significant aspects of management’s role in the compensation-setting process are (1) recommending compensation programs, compensation policies, compensation levels and incentive opportunities that are consistent with Duke Energy’s business strategies; (2) compiling, preparing and distributing materials for Committee meetings, including market data; (3) recommending performance targets and objectives; and (4) assisting in the evaluation of employee performance. Each year, management reviews the performance of each executive within the purview of the Committee (other than the Chief Executive Officer and the Executive Chairman whose performance is reviewed by the Corporate Governance Committee). The conclusions reached and recommendations based on these reviews, including with respect to any salary adjustments and annual award amounts, are presented to the Committee. The Committee exercises its discretion in modifying recommended adjustments and awards for executives.

Objectives of the Compensation Program

The guiding principle of Duke Energy’s compensation philosophy is that pay should be linked to performance with significant upside and downside potential depending upon actual results as compared to predetermined measures of success. It follows that, as discussed in more detail below, historically, more than half of the compensation opportunity of the executives within the purview of the Committee has been provided in the form of short-term and long-term incentives. These incentives yield varying levels of compensation and associated costs, including zero in the event of poor performance, depending upon the extent to which predetermined corporate, business unit and individual goals are achieved. The Committee also believes that Duke Energy’s overall compensation levels should be sufficiently competitive to attract talented leaders and motivate those leaders to achieve superior results, while at the same time be set at responsible levels. Consistent with these principles, the Committee has approved compensation programs intended to:

·              Attract and retain talented executive officers and key employees by providing total compensation competitive with that of other executives and key employees employed by companies of similar size, complexity and lines of business;

24

·              Motivate executives and key employees to achieve strong financial and operational performance;

·              Emphasize performance-based compensation, which balances rewards for short-term and long-term results;

·              Reward individual performance;

·              Link the interests of executives with shareholders by providing a significant portion of total pay in the form of stock-based incentives and requiring target levels of stock ownership; and

·              Encourage long-term commitment to Duke Energy.

Setting Executive Compensation Consistent with Duke Energy’s Compensation Philosophy

In December of each year, the Committee generally reviews each component of compensation, including base pay, short-term incentive opportunities and long-term incentive opportunities, of each executive under its purview, using the appropriate external and internal data (as described below) with any resulting adjustments being effective on the first day of the following year. As part of its decision making process, the Committee reviews data from market surveys and proxy statements, when available, to assess competitiveness and ensure that its compensation actions are appropriate and reasonable and consistent with its philosophy, in light of the various markets in which Duke Energy competes for talent. The Committee also focuses on internal pay equity and considers skills, experience and other factors, such as developmental and rotational assignments, that may affect the competiveness of compensation for a given year.

In December 2005, the Committee met to establish compensation levels for 2006. This was prior to the merger between Duke Energy and Cinergy. Consistent with its compensation philosophy, the Committee established base salaries at a level that approximated the median salaries of individuals in comparable positions and markets and established short-term incentive opportunities intended to provide total cash compensation (i.e., base salary and short-term incentive opportunity) at the market median for individuals in comparable positions and markets in the event of the achievement of target performance and above market median in the event of outstanding financial, operational and individual results. Additionally, in furtherance of the Committee’s objective of aligning executives’ and shareholders’ interests and to provide a retention incentive, the Committee focused on ensuring that equity-based compensation (i.e., long-term incentive compensation) constituted a significant component of the compensation for the executives within its purview. In June 2006, additional adjustments were made to compensation levels for the management team of the merged company. The Committee reviewed market surveys comparing each element of total compensation against comparable companies.  To determine the most appropriate benchmark, specific attributes of the executive positions were considered, including relevant industry talent pool, revenue scope, roles and responsibilities, internal pay equity and data availability.  Depending on the specific position benchmarked, market data was sourced from one of the following two Towers Perrin compensation surveys: (i) the 2006 CDB Energy Services Industry Executive Compensation Database, which consists of 96 companies from the energy services industry; and (ii) the 2006 CDB General Industry Executive Compensation Database, which consists of 363 companies from a variety of industries.

Due to change in the scope and scale of Duke Energy as a result of recent corporate transactions, including, but not limited to (i) the spin-off of Spectra Energy; (ii) the sale of the

25

marketing and trading business; and (iii) the sale of a portion of Crescent Resources, the competitive positioning at target performance has moved above median for some executives. The Committee has developed an approach that, over time, will re-align the competitive positioning consistent with the compensation philosophy of targeting total cash compenstion at market median for target performance. The long-term incentive opportunity of certain executives, however, may be above the market median when target performance is achieved.

The Committee designed the Duke Energy 2007 long-term incentive program to provide long-term incentive opportunities that are above the market median for individuals in comparable positions and markets if target performance is achieved and significant upside opportunity if outstanding results are achieved.

Elements of Duke Energy’s Compensation Program and Why Each Element Was Chosen (How It Relates to Objectives)

As discussed in more detail below, during 2006 the principal components of compensation for the named executive officers were:

·              base salary;

·              short-term incentive compensation;

·              long-term equity incentive compensation;

·              retention awards;

·              retirement and other benefits; and

·              severance.

Base Salary.   Base salaries for named executives are determined based upon job responsibilities, level of experience, individual performance, comparisons to the salaries of executives in similar positions obtained from market surveys and internal comparisons. The Committee approves all salary adjustments for executive officers (other than Messrs. Anderson and Rogers, who do not receive base salaries).

Short-Term Incentives.   Short-term incentive opportunities are provided to the named executive officers (other than Messrs. Anderson and Rogers, who do not participate in the short-term incentive program) under the Duke Energy Corporation Executive Short-Term Incentive Plan (“STI Plan”) to promote the achievement of annual performance objectives. Each year the Committee establishes the threshold, target and maximum incentive opportunities for each participating named executive officer, which is based on a percentage of his or her base salary, along with the individual, corporate and/or business unit goals that must be achieved to receive those incentive opportunities.

During 2006, eighty percent (80%) of this opportunity was based on achievement of corporate and/or business unit financial goals, and the remaining twenty percent (20%) was based on achievement of individual goals. The primary 2006 corporate goal consisted of a pre-established on-going earnings per share (“EPS”) goal. Mr. O’Connor and Dr. Shaw also were subject to a business

26

unit goal based upon the 2006 earnings before interest and taxes (“EBIT”) of the U.S. Franchised Electric and Gas business unit.

The Committee included a safety penalty in the 2006 short-term incentive program in order to encourage a continued focus on safety. In particular, in the event of a fatality of any Duke Energy employee, contractor or sub-contractor during 2006, the short-term incentive opportunity of each executive who participated in Duke Energy’s long-term incentive program during 2006 would be reduced by 5%. The incentive opportunities and related individual, corporate and/or business unit goals for 2006 are described in more detail on pages 39-40.

As discussed in more detail on page 39, pursuant to the guidelines adopted at the time the 2006 program was established in February 2006, the Committee reduced the threshold, target and maximum performance levels for the 2006 on-going EPS goal from $1.75, $1.90 and $2.10 to $1.69, $1.84 and $2.04, respectively, in order to reflect the earnings impact of the partial divestiture of Crescent Resources and the divestiture of Duke Energy’s energy marketing and trading business. Duke Energy achieved a result between the target and maximum performance levels with respect the adjusted corporate EPS goal.

Also, as discussed above, a U.S. Franchised Electric and Gas business unit EBIT goal applied with respect to the 2006 short-term incentive opportunities of Mr. O’Connor and Dr. Shaw. Although actual performance was less than the threshold level of performance by approximately 3.5%, in light of the extraordinary effort in connection with the completion of the merger and integration of the regulated segment of the business, the Committee exercised discretion and approved a payout level corresponding to threshold achievement with respect to this U.S. Franchised Electric and Gas business unit EBIT goal. More detail regarding the U.S. Franchised Electric and Gas business unit EBIT goal is set forth on page 40.

For 2006, Mr. Hauser and Dr. Shaw achieved maximum performance with respect to individual goals, which corresponds to a payout of 150% of target, and Messrs. Fowler’s and O’Connor’s achievements with respect to individual goals corresponded to a payout equal to 117.50% and 143.75% of target, respectively. The corporate, business unit and individual performance discussed above as well as the application of the 5% safety reduction resulted in 2006 STI Plan payouts equal to $543,396, $797,747, $410,427, and $390,652 for Messrs. Hauser, Fowler and O’Connor and Dr. Shaw, respectively.

For 2007, each executive officer, except Mr. Rogers, will again participate in the STI Plan. Each named executive officer’s incentive will be based on a corporate financial objective, which again will be based on Duke Energy’s ongoing EPS for 2007 and will be weighted 80%, and operational or individual objectives, which will be weighted 20% in the aggregate. Similar to 2006, each executive officer will be subject to up to a 5% reduction in their STI Plan payout in the event a predetermined safety goal is not achieved; additionally, the 2007 short-term incentive awards of the entire non-union employee population (except for Mr. Rogers, who does not participate in the short-term incentive program), will be increased by 5% if there are no employee, contractor or subcontractor fatalities in 2007.

Long-Term Incentives.   Long-term incentive opportunities are provided to the named executive officers (other than Messrs. Anderson and Rogers, who do not participate in the long-term incentive program) to align executive and shareholder interests in an effort to maximize shareholder value. In this regard, each year the Committee reconsiders the design and amount of the long-term incentives

27

and generally grants equity awards at the Committee’s first regularly-scheduled meeting each year. Duke Energy’s executives do not have a role in selecting the date on which long-term incentives are granted.

In 2006, due to the April 3, 2006 merger of Duke Energy and Cinergy, long-term incentives were granted at the first meeting of the Committee that occurred following consummation of the merger, and the 2006 long-term incentive opportunities of certain executive officers, including Mr. O’Connor, were later increased due to increases in responsibilities. Except for Messrs. Anderson and Rogers, who did not participate in the long-term incentive program in 2006, one-half of each named executive officer’s 2006 long-term incentive opportunity was provided in the form of phantom shares and the remaining half was provided in the form of performance shares, as follows:

The 2006 phantom shares generally vest in equal portions on each of the first five anniversaries of April 4, 2006, provided the recipient continues to be employed by Duke Energy or his or her employment terminates by reason of retirement. The 2006 performance shares generally vest only to the extent that certain total shareholder return (“TSR”) targets for the three-year period from January 1, 2006 to December 31, 2008 are met as compared with the TSR of a peer group of companies. As discussed in more detail on pages 34-35, the terms of the 2006 phantom share and performance share awards were modified upon the spin-off of Duke Energy’s gas businesses to form Spectra Energy.

More details regarding the 2006 long-term incentive program, including the opportunity levels of the named executive officers and the detailed terms of the applicable performance share and phantom share award agreements are set forth on pages 40-42.

28

The 2004 performance share cycle commenced on January 1, 2004 and ended on December 31, 2006. In order to align the interests of executives and shareholders, the award agreements for the performance shares granted under this 2004 cycle generally provided that the shares would vest only to the extent that Duke Energy’s TSR targets for the three-year period from January 1, 2004 to December 31, 2006 were met as compared with the TSR of a peer group of companies. The following table illustrates how the performance share payouts directly align participants’ pay to Duke Energy’s performance:

Performance shares earned are interpolated for TSR performance between these percentiles. For this purpose, (1) TSR refers to the change in fair market value over a specified period of time, expressed as a percentage of an initial investment in common stock, with dividends reinvested, and (2) the applicable peer group consists of the companies in the S&P 500. In August 2006, in order to prevent possible distortion resulting from a one day fluctuation in stock price, the Committee approved an amendment to the terms of the 2004 performance shares modifying the awards to provide that the average TSR for the final 30 business days of the period would be considered the TSR at the end of the period.

As was the case for the 2006 grants, phantom share grants (including those in the 2004 cycle) have historically vested in equal portions on each of the first five anniversaries of the grant date. The 2004 phantom share awards provided for accelerated vesting of any remaining unvested phantom shares (or a prorated portion thereof for retired participants) in the event Duke Energy’s TSR for the 2004-2006 period as compared with the TSR of the S&P 500 was at or above the 70th percentile.

Duke Energy achieved a relative TSR percentile ranking of 75.6 for the 2004-2006 period, which corresponded to (i) a payout of 114.0% of the target level of performance shares, and (ii) accelerated vesting of the phantom shares granted as part of the 2004 cycle. As discussed in more detail on pages 34-35, the terms of all outstanding phantom share and performance share awards were modified upon the spin-off of Spectra Energy by splitting the outstanding equity awards into Duke Energy and Spectra Energy equity awards.  The following table lists the performance shares and phantom shares (granted under the 2004 cycle) in which the named executive officers (other than Messrs. Anderson and Rogers) became vested in 2006:

With respect to the 2007 long-term incentive compensation program, the Committee has maintained the equal mix between phantom shares and performance shares. However, the 2007 phantom share awards are subject to a three-year vesting schedule rather than the five-year schedule

29

used for previous cycles. The 2007 performance share grants generally will vest only to the extent two predetermined measures are achieved. The vesting of fifty percent of the performance shares will be based on Duke Energy’s TSR performance as compared to the Philadelphia Utilities Index for the three-year period commencing on January 1, 2007 and ending on December 31, 2009, as follows:

The vesting of the remaining performance shares will be based on Duke Energy’s actual 3-year compounded annual growth rate in ongoing EPS (“CAGR”), as follows:     

In addition to the annual grants under the long-term incentive program, from time to time, the Committee may grant additional long-term incentives to recognize increased responsibilities or special contributions, to attract new hires, to retain executives, or to recognize other special circumstances. Stock options are among the equity-based compensation vehicles that may be granted to individual executives in appropriate circumstances. For example, as described in more detail below, the Committee granted a stock option to Mr. Rogers immediately following the merger with Cinergy. However, the Committee has not granted stock options as a regular component of the long-term incentive program since 2003. Duke Energy’s long-term incentive plan, the Duke Energy Corporation 2006 Long-Term Incentive Plan, prohibits the repricing of stock options and the granting of “in the money options” (i.e., options with an exercise price below the grant date fair market value of a share of Duke Energy common stock).

As described in more detail below, Duke Energy has established a stock ownership policy to complement its long-term incentive program. The ownership policy applies to the Chief Executive Officer, all executives who participate in the long-term incentive program and all members of the Duke Energy Corporation Board of Directors.

Retention Awards.   The Committee may grant retention awards from time to time to retain executives or to recognize other special circumstances. In 2006, immediately following the merger with Cinergy, Duke Energy granted retention awards to several of its executive officers, including Messrs. Hauser and O’Connor and Dr. Shaw. As described in more detail on page 58, Dr. Shaw’s award was cancelled on October 23, 2006 and the awards to Messrs. Hauser and O’Connor generally vest, subject to continued employment, on the second anniversary of the date of the merger with Cinergy, at which time the recipient will receive a fixed cash payment.

30

Retirement and Other Benefits.   These benefits are comparable to the benefits provided by peers of Duke Energy, as determined based on market surveys, and provide an important tool for the attraction and retention of employees. Duke Energy provides employee benefits to the named executive officers under several different plans. Messrs. Anderson and Rogers do not participate in any of these employee benefit plans on a going forward basis except with respect to the receipt of health and welfare benefits; however, they maintain balances under certain of these plans reflecting previously accrued benefits.

The Duke Energy Retirement Savings Plan, a “401(k) plan,” is generally available to all Duke Energy employees in the United States. The plan is a tax-qualified retirement plan that provides a means for employees to save for retirement on a tax-deferred basis and to receive an employer matching contribution. Earnings on amounts credited to the Duke Energy Retirement Savings Plan are determined by reference to investment options (including a Duke Energy Common Stock Fund) selected by each participant.

The Duke Energy Executive Savings Plan is offered to a select group of management, including the named executive officers. The plan enables these employees to defer compensation, and receive employer matching contributions, in excess of the limits of the Internal Revenue Code of 1986, as amended, that apply to qualified retirement plans such as the Duke Energy Retirement Savings Plan. Earnings on amounts credited to the Duke Energy Executive Savings Plan are determined by reference to investment options similar to those offered under the Duke Energy Retirement Savings Plan.

The Duke Energy Retirement Cash Balance Plan is generally available to all Duke Energy employees in the United States. It provides a defined benefit for retirement, the amount of which is based on a participant’s cash balance account balance, which grows with monthly pay and interest credits.

The Duke Energy Executive Cash Balance Plan is offered to a select group of management, including the named executive officers. The plan provides these employees with the retirement benefits to which they would be entitled under the Duke Energy Retirement Cash Balance Plan but for certain limits contained in the Internal Revenue Code of 1986, as amended.  Additionally, supplemental credits have been made to this plan on behalf of certain executives when determined to be reasonable and appropriate (e.g., to reflect conversions of amounts previously accrued under nonqualified final average pay retirement plans).

With the exception of certain grandfathered life insurance benefits provided to Mr. Hauser and Dr. Shaw, Duke Energy provides the named executive officers with the same health and welfare benefits as it provides to all other similarly-situated employees, at the same cost charged to all other eligible employees. The named executive officers are also entitled to the same post-retirement health and welfare benefits as those provided to similarly-situated retirees. Additionally in 2006, Duke Energy provided the named executive officers with certain other perquisites, which are disclosed in footnote 5 to the “Summary Compensation Table” on page 38.

Compensation of the Chief Executive Officer

As stated above, the Committee is responsible for establishing the compensation of the Chief Executive Officer. The Committee’s objective in this regard is to motivate and retain a Chief Executive

31

Officer who is committed to delivering sustained superior performance for all of Duke Energy’s stakeholders. In order to ensure a thorough consideration of prior year results, the Committee reviews and approves the compensation of the Chief Executive Officer based upon input from the Corporate Governance Committee regarding the Chief Executive Officer’s performance and informs the Board of any adjustments or actions.

Paul M. Anderson

Mr. Anderson served as the President, Chief Executive Officer and Chairman of the Board of Directors of Duke Energy until its merger with Cinergy on April 3, 2006, at which time Mr. Rogers became the President and Chief Executive Officer and Mr. Anderson assumed the role of Executive Chairman of the Board of Directors. On January 2, 2007, Mr. Anderson retired from Duke Energy in connection with Duke Energy’s spin-off of Spectra Energy.

As described in more detail on page 55, the employment agreement between Duke Energy and Mr. Anderson compensated Mr. Anderson substantially in the form of stock-based compensation in lieu of base salary, annual cash incentives and certain employee benefits. During 2006, effective with Duke Energy’s merger with Cinergy, Duke Energy and Mr. Anderson mutually agreed that, in light of the change in Mr. Anderson’s role and responsibilities, his maximum performance share award for 2006 would be reduced from the 120,000 shares originally contemplated in his employment agreement to 70,000 shares.

The vesting of 30,000 of these performance shares continued to be based 80% on Duke Energy’s on-going EPS and 20% on previously-established objectives, which consisted of strategic goals relating to such things as completion of the merger with Cinergy; building a high performance culture focused on safety, diversity and inclusion, employee development, leadership and results; positioning Duke Energy for growth in 2007 and beyond; completion of the divestiture of the energy marketing and trading segment; and, building credibility through leadership on key policy issues, transparent communications and excellent customer service. The vesting of the remaining 40,000 performance shares was based on the extent to which Mr. Anderson attained certain strategic objectives established shortly following the merger, which were based on his success in resolving the issues of desirability of separating the gas and electric businesses, achieving a successful integration of Cinergy, resolving other strategic issues, and enhancing shareholder value by being an external voice for Duke Energy to the investment community.

Based on the actual level of achievement of the objectives related to Mr. Anderson’s performance shares for 2006, Mr. Anderson earned 66,500 of his 70,000 performance shares for 2006, after application of the same 5% safety penalty that was otherwise applicable under the 2006 short-term incentive program. Because he remained employed with Duke Energy during the entire term of his employment agreement, Mr. Anderson also became fully vested in the stock options and phantom shares granted pursuant to his employment agreement, and the stock options became exercisable.

Following Mr. Anderson’s retirement, pursuant to the terms of the employment agreement and the documents memorializing the spin-off of Spectra Energy, he received the payment of earned and vested phantom shares and performance shares in the form of Duke Energy common stock and Spectra Energy common stock. The options were also adjusted upon the spin-off of Spectra Energy such that they were split between options issued by Duke Energy and Spectra Energy. More information regarding the treatment of outstanding equity awards upon the spin-off of Spectra Energy is set forth on pages 34-35.

32

James E. Rogers

Effective upon Duke Energy’s merger with Cinergy, Duke Energy entered into a three-year employment agreement with Mr. Rogers to provide for his employment as President and Chief Executive Officer. The agreement, which is described in more detail on pages 55-56, is similar to Mr. Anderson’s agreement in that it compensates Mr. Rogers substantially in the form of equity-based compensation in order to directly align Mr. Rogers’ interests with those of the shareholders by making his compensation directly contingent upon stock price, performance and dividend yield. Under the agreement, Mr. Rogers will not receive a base salary and will not be eligible to participate in cash bonus programs. Instead, he will be compensated substantially through the following equity awards.

First, Mr. Rogers received an option to purchase 1,877,646 shares of Duke Energy common stock at a per share exercise price equal to the fair market value of a Duke Energy share on the date of grant. The option vests ratably in annual installments over three years. Mr. Rogers generally will be prohibited from selling stock acquired pursuant to the option until April 3, 2009 (or, if earlier, upon termination of employment). Second, Mr. Rogers received 258,180 phantom shares, one-twelfth of which were vested upon grant and one-twelfth of which vest each quarter thereafter. Finally, Mr. Rogers received 322,800 performance shares. The performance share award will vest in three equal tranches dependent upon the satisfaction of performance criteria established by the Committee for each of 2006, 2007 and 2008. For 2006, the performance criteria were weighted 80% on Duke Energy’s on-going EPS and 20% on individual strategic and operational goals based on such things as achieving merger synergy targets, improving organizational performance, divesting of the energy marketing and trading business, completing the spin-off of the gas businesses, completing the partial divestiture of Crescent Resources, and nurturing community and customer relationships. The vested phantom shares and performance shares will not be paid until April 3, 2009 (or, if earlier, upon the termination of employment), and will earn fully vested and currently payable cash dividend equivalents while they remain outstanding but unpaid.

Based on the actual level of achievement of the objectives related to Mr. Rogers’ performance shares for 2006, Mr. Rogers earned 102,220 of his 107,600 performance share opportunity for 2006, after application of the same 5% safety penalty that was otherwise applicable under the 2006 short-term incentive program. As was the case for Mr. Anderson, Mr. Rogers’ equity grants were adjusted in connection with the spin-off of Spectra Energy such that, post-spin, they consist of both Duke Energy and Spectra Energy shares as discussed in more detail on pages 34-35.

Mr. Rogers’ employment agreement provides him a 2007 performance share opportunity consisting of 107,600 performance shares that will vest to the extent certain performance criteria are met. For 2007, the performance criteria are weighted 80% on Duke Energy’s on-going EPS and 20% on individual strategic and operational goals that are based on such things as achieving certain growth targets; effectively executing strategies relating to succession and workforce planning, employee engagement, diversity and inclusion programs; completion of scalable platform initiatives; effectively executing strategies relating to key safety performance indicators and operational performance; and, leading on key policy issues.

33

Other Compensation Policies

Stock Ownership Policy:   Duke Energy has adopted a stock ownership policy for executive officers and other key employees who receive long-term incentives. To reinforce the importance of stock ownership, an employee who is subject to the policy and who does not achieve his or her ownership target by the applicable date will become ineligible for future long-term incentives unless he or she elects to apply all short-term incentive payments to the purchase of Duke Energy common stock until his or her target ownership level is achieved. As of December 31, 2006, the stock ownership guidelines were as follows:

Each employee is required to satisfy the ownership target within five years after becoming subject to the policy. All executive officers whose stock ownership guideline target date was on or before December 31, 2006 have met the ownership target.

Limit on Severance Agreements:   As discussed in more detail on pages 54-60, certain severance protections are offered to the named executive officers. The Committee believes that the protection provided through these severance arrangements is appropriate as it diminishes the potential distraction of the executives by virtue of the personal uncertainties and risks associated with their roles, especially in the context of a potential change in control. During 2006, Duke Energy approved a policy pursuant to which it will seek shareholder approval for any future agreement with certain individuals (e.g., a named executive officer) that provides certain severance benefits in excess of 2.99 times the sum of the executive’s base salary and annual bonus, plus the value of continued participation in welfare, retirement and equity compensation plans determined as if the executive remained employed for 2.99 additional years. Under the policy, Duke Energy also will seek shareholder approval of any such agreement that provides for the payment of any tax gross-ups by reason of the executive’s termination of employment, including reimbursement of golden parachute excise taxes.

Corporate Transactions

Recently, Duke Energy accomplished two significant transactions that have impacted its executive compensation programs. The first was its April 3, 2006 merger with Cinergy. As a result of this merger, Duke Energy is faced with the challenge of integrating the Duke Energy executive compensation structure and the legacy Cinergy structure. Presently, the combined entity is continuing its efforts to move the legacy Cinergy executive population to the Duke Energy executive compensation model. In this regard, the final average pay retirement benefit previously provided under the Cinergy Corp. Supplemental Executive Retirement Plan is being phased out, as is Cinergy’s perquisite policy.

The second such transaction was the spin-off of Duke Energy’s gas businesses to form Spectra Energy, effective January 2, 2007. Effective with the spin-off, equitable adjustments were made with

34

respect to stock options and outstanding equity awards (together, “awards”) relating to Duke Energy common stock. All such awards were adjusted into two separate awards, one relating to Duke Energy common stock and one relating to Spectra Energy common stock. This adjustment was made such that the number of shares relating to the award covering Spectra Energy common stock was equal to the number of shares of Spectra Energy common stock that the award holder would have received in the distribution had the Duke Energy award represented outstanding shares of Duke Energy common stock (i.e., a ratio of 0.5 shares of Spectra Energy common stock for every one share of Duke Energy common stock). With respect to stock options, the per share option exercise price of the original Duke Energy stock option was proportionally allocated between the two types of stock options taking into account the distribution ratio and the relative per share trading prices immediately following the distribution. The resulting Duke Energy and Spectra Energy awards continue to be subject to the vesting schedule under the original Duke Energy award agreement. For purposes of vesting and the post-termination exercise periods applicable to the options, continued employment with Duke Energy or Spectra Energy is considered to be continued employment with the issuer. In the case of performance units, TSR is determined for periods following December 31, 2006, based on an equally-weighted average of the TSR of Duke Energy and the TSR of Spectra Energy. The adjustments preserved, but did not increase, the value of the equity awards.

Tax and Accounting Implications

Deductibility of Executive Compensation:   The Committee reviews and considers the deductibility of executive compensation under Section 162(m) of the Internal Revenue Code, which provides that Duke Energy generally may not deduct for federal income tax purposes annual compensation in excess of $1 million paid to certain employees. Performance-based compensation paid pursuant to shareholder-approved plans is not subject to the deduction limit as long as such compensation is approved by “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code. During 2006, a Subcommittee for Performance-Based Compensation, which was comprised of those Committee members who qualified as “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code, approved compensation that was intended to satisfy the performance-based compensation exception.

While the Committee generally intends to structure and administer executive compensation plans and arrangements so that they will not be subject to the deduction limit of Section 162(m) of the Internal Revenue Code, the Committee may from time to time approve payments that cannot be deducted in order to maintain flexibility in structuring appropriate compensation programs in the interests of shareholders. For example, phantom share awards received by certain employees may not be deductible for federal income tax purposes, depending on the amount and other types of compensation received by such employees.

Accounting for Stock-Based Compensation:   Beginning on January 1, 2006, Duke Energy began accounting for stock-based payments in accordance with the requirements of FAS 123R. Under this accounting pronouncement, Duke Energy is required to value unvested stock options granted prior to our adoption of FAS 123R under the fair value method and expense those amounts in the income statement over the stock option’s remaining vesting period.

Non-GAAP Financial Measures:   As described previously in this Compensation Discussion and Analysis and on pages 39-40, Duke Energy uses various financial measures, including EPS and EBIT, in connection with short-term and long-term incentives.  SEC rules require that Duke Energy disclose how these financial measures are calculated based on Duke Energy's audited financial statements.  In

35

particular, where Duke Energy uses EPS with respect to short-term and long-term incentives, the most directly comparable generally accepted accounting principles (“GAAP”) financial measure is diluted EPS from continuing operations as reported in Duke Energy’s audited financial statements, with the exception that the Compensation Committee may adjust reported EPS, in accordance with predetermined criteria, by excluding certain special items, which represent charges or credits that the Compensation Committee believes are of an unusual nature.  For 2006, these exclusions included such things as the earnings impact of losses from discontinued operations, costs to achieve the merger with Cinergy and the spin-off of the gas businesses, certain asset impairments, certain settlement accruals, purchase accounting adjustments, gains on sales of assets, tax-related adjustments, the gain realized on the settlement of a contract dispute, and the gain on the partial divestiture of Crescent Resources.  Where Duke Energy uses EBIT with respect to short-term incentives, the most directly comparable GAAP financial measure is appropriate segment EBIT as reported in Duke Energy’s audited financial statements, with the exception that the Compensation Committee may adjust reported segment EBIT in a manner similar to that described above with respect to EPS.

36

EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

(1)                             This column reflects the aggregate dollar amount recognized for financial statement reporting purposes for 2006 with respect to outstanding performance share and phantom share awards, and includes amounts attributable to performance share and phantom share awards granted in prior years. The aggregate dollar amount was determined in accordance with the provisions of FAS 123R, but without regard to any estimate of forfeitures related to service-based vesting conditions. See Note 20 of the consolidated financial statements in Duke Energy’s Form 10-K as filed with the SEC for the year ended December 31, 2006 regarding assumptions underlying the valuation of equity awards. As previously described in the Compensation Discussion and Analysis, with respect to 2006, Mr. Anderson forfeited 3,500 performance shares and Mr. Rogers forfeited 5,380 performance shares.

(2)                             This column reflects the aggregate dollar amount recognized for financial statement reporting purposes for 2006 with respect to outstanding stock options, and includes amounts attributable to stock options granted in prior years. The aggregate dollar amount was determined in accordance with the provisions of FAS 123R, but without regard to any estimate of forfeitures related to service-based vesting conditions. See Note 20 of the consolidated financial statements in Duke Energy’s Form 10-K as filed with the SEC for the year ended December 31, 2006 regarding assumptions underlying the valuation of equity awards.

(3)                             Non-Equity Incentive Plan Compensation column includes amounts payable under the Duke Energy Corporation Executive Short-Term Incentive Plan with respect to the 2006 performance period. Unless deferred, these amounts were paid in March 2007.

37

(4)                             Change in Pension Value and Nonqualified Deferred Compensation Earnings column includes the amounts listed below. With respect to pension plans, these amounts relate to the one-year period ending on September 30, 3006, which is the applicable pension plan measurement date. With respect to above-market interest on deferred compensation arrangements, these amounts relate to the one-year period ending on December 31, 2006.