Filed Pursuant to Rule 424(b)(5)
                                                Registration No. 333-85486


THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN
OFFER TO SELL THESE SECURITIES, AND WE ARE NOT SOLICITING OFFERS TO BUY THESE
SECURITIES, IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

PROSPECTUS SUPPLEMENT (Subject to Completion) Issued September 24, 2002

(To Prospectus dated August 27, 2002)

                               52,000,000 SHARES

                               [DUKE ENERGY LOGO]
                                  COMMON STOCK
                            ------------------------

Duke Energy Corporation is offering 52,000,000 shares of its common stock.

Our common stock is listed on the New York Stock Exchange under the trading
symbol "DUK." On September 24, 2002, the reported last sale price of our common
stock on the New York Stock Exchange was $19.24 per share.
                            ------------------------

INVESTING IN OUR COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" BEGINNING ON
PAGE S-7 OF THIS PROSPECTUS SUPPLEMENT.
                            ------------------------
                              PRICE $     A SHARE
                            ------------------------



                                                                         UNDERWRITING
                                                          PRICE TO       DISCOUNTS AND       PROCEEDS TO
                                                           PUBLIC         COMMISSIONS        DUKE ENERGY
                                                          --------       -------------       -----------
                                                                                    
Per Share.....................................              $               $                   $
Total.........................................            $              $                   $


We have granted the underwriters the right to purchase up to an additional
7,800,000 shares to cover over-allotments.

The Securities and Exchange Commission and state securities regulators have not
approved or disapproved these securities or determined if this prospectus
supplement or the accompanying prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares to purchasers on or about
          , 2002.
                         ------------------------------
                                 MORGAN STANLEY
                         ------------------------------

BANC OF AMERICA SECURITIES LLC
            DEUTSCHE BANK SECURITIES
                         GOLDMAN, SACHS & CO.
                                     JPMORGAN
                                               SALOMON SMITH BARNEY
                                                       WACHOVIA SECURITIES
                            ------------------------
ABN AMRO ROTHSCHILD LLC
              CIBC WORLD MARKETS
                            CREDIT SUISSE FIRST BOSTON
                                         SCOTIA CAPITAL
                                                  TD SECURITIES
                                                            UBS WARBURG
September   , 2002


     You should rely only on the information contained in or incorporated by
reference in this prospectus supplement and the accompanying prospectus. We have
not authorized anyone to provide you with information that is different. We are
not making an offer to sell these securities in any jurisdiction where the offer
is not permitted. You should not assume that the information provided by or
incorporated by reference in this prospectus supplement or the accompanying
prospectus is accurate as of any date other than the date of the document
containing the information.

                               TABLE OF CONTENTS



        PROSPECTUS SUPPLEMENT           PAGE
        ---------------------           ----
                                     
About this Prospectus Supplement......     i
Forward-Looking Statements............   S-1
Prospectus Supplement Summary.........   S-2
Risk Factors..........................   S-7
Use of Proceeds.......................  S-20
Price Range of Common Stock...........  S-21
Dividends.............................  S-21
Capitalization........................  S-22
Certain United States Tax Consequences
  to Non-United States Holders........  S-23
Underwriting..........................  S-25
Experts...............................  S-27
Legal Matters.........................  S-27




              PROSPECTUS                PAGE
              ----------                ----
                                     
About this Prospectus.................     2
Duke Energy Corporation...............     3
Use of Proceeds.......................     5
Recent Developments...................     5
The Trusts............................     6
Description of the Senior Notes.......     7
Description of the Junior Subordinated
  Notes...............................    14
Description of the First and Refunding
  Mortgage Bonds......................    22
Description of the Common Stock.......    25
Description of the Stock Purchase
  Contracts and the Stock Purchase
  Units...............................    28
Description of the Preferred
  Securities..........................    29
Description of the Guarantees.........    29
Plan of Distribution..................    32
Experts...............................    33
Validity of the Securities............    33
Where You Can Find More Information...    34


                        ABOUT THIS PROSPECTUS SUPPLEMENT

     This document is in two parts. The first part is this prospectus
supplement, which describes the specific terms of this common stock offering.
The second part, the accompanying prospectus, gives more general information,
some of which may not apply to this offering.

     If the description of the offering varies between this prospectus
supplement and the accompanying prospectus, you should rely on the information
contained in or incorporated by reference into this prospectus supplement.

     Unless we have indicated otherwise, or the context otherwise requires,
references in this prospectus supplement and the accompanying prospectus to
"Duke Energy," "we," "us" and "our" or similar terms are to Duke Energy
Corporation and its subsidiaries.

                                        i


                           FORWARD-LOOKING STATEMENTS

     This prospectus supplement and the accompanying prospectus contain or
incorporate by reference statements that do not directly or exclusively relate
to historical facts. Such statements are "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995. You can
typically identify forward-looking statements by the use of forward-looking
words, such as "may," "will," "could," "project," "believe," "anticipate,"
"expect," "estimate," "continue," "potential," "plan," "forecast" and the like.
Those statements represent our intentions, plans, expectations, assumptions and
beliefs about future events and are subject to risks, uncertainties and other
factors. Many of those factors are outside our control and could cause actual
results to differ materially from the results expressed or implied by those
forward-looking statements. Those factors include:

     - state, federal and foreign legislative and regulatory initiatives that
       affect cost and investment recovery, have an impact on rate structures,
       and affect the speed at and degree to which competition enters the
       electric and natural gas industries;

     - the outcomes of litigation and regulatory proceedings or inquiries;

     - industrial, commercial and residential growth in our service territories;

     - the weather and other natural phenomena;

     - the timing and extent of changes in commodity prices, interest rates and
       foreign currency exchange rates;

     - general economic conditions;

     - changes in environmental and other laws and regulations to which we and
       our subsidiaries are subject or other external factors over which we have
       no control;

     - the results of financing efforts, including our ability to obtain
       financing on favorable terms, which can be affected by various factors,
       including our credit ratings and general economic conditions;

     - the level of creditworthiness of counterparties to our transactions;

     - the amount of collateral required to be posted from time to time in our
       transactions;

     - growth opportunities for our business units, including the timing and
       success of efforts to develop domestic and international power, pipeline,
       gathering, processing and other infrastructure projects;

     - the performance of our electric generation, pipeline and gas processing
       facilities;

     - the extent of our success in connecting natural gas supplies to gathering
       and processing systems and in connecting and expanding our gas and
       electric markets; and

     - the effect on our results of accounting principles issued periodically by
       accounting standard-setting bodies.

     In light of these risks, uncertainties and assumptions, the forward-looking
events referred to in this prospectus supplement and the accompanying prospectus
might not occur or might occur to a different extent or at a different time than
we have described. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.

                                       S-1


                         PROSPECTUS SUPPLEMENT SUMMARY

     The following is qualified in its entirety by, and should be read together
with, the more detailed information and financial statements included or
incorporated by reference in this prospectus supplement and the accompanying
prospectus. Unless otherwise indicated, all of the following information assumes
that the underwriters have not exercised their over-allotment option.

                            DUKE ENERGY CORPORATION

OVERVIEW

     We are a leading integrated energy and energy services provider with the
ability to offer physical delivery and management of both electricity and
natural gas throughout the United States and in certain countries abroad. We own
and operate one of the world's largest portfolios of generating plants, one of
the nation's largest natural gas pipeline systems and an active energy trading
and marketing operation. We are also the largest producer of natural gas
liquids, or NGLs, in the United States. The services and products we provide are
offered through the following seven business segments:

     FRANCHISED ELECTRIC generates, transmits, distributes and sells electricity
in central and western North Carolina and western South Carolina. We currently
operate 20,500 megawatts (MW) of generation capacity and serve over two million
customers in the Carolinas. Franchised Electric conducts operations primarily
through Duke Power and Nantahala Power and Light.

     NATURAL GAS TRANSMISSION provides transportation, storage and distribution
of natural gas for customers throughout the east coast and southern portion of
the United States and Canada. Natural Gas Transmission also provides gas
gathering, processing and transportation services to customers located in
British Columbia, Canada and in the Pacific northwest region of the United
States. Following our acquisition of Westcoast Energy, Inc. on March 14, 2002,
we currently have approximately 19,000 miles of natural gas pipelines. Natural
Gas Transmission does business primarily through Duke Energy Gas Transmission
Corporation.

     FIELD SERVICES gathers, processes, transports, markets and stores natural
gas and produces, transports, markets and stores NGLs. We currently produce
approximately 400 million barrels per day of natural gas liquids. Field Services
conducts operations primarily through Duke Energy Field Services, LLC, which is
approximately 30% owned by ConocoPhillips. Field Services operates gathering
systems in western Canada and 11 contiguous states in the United States. Those
systems serve major natural gas-producing regions in the Rocky Mountains,
Permian Basin, Mid-Continent, East Texas-Austin Chalk-North Louisiana, and
onshore and offshore Gulf Coast areas.

     DUKE ENERGY NORTH AMERICA, or DENA, develops, operates and manages merchant
generation facilities and engages in commodity sales and services related to
natural gas and electric power. Our current merchant generation portfolio totals
approximately 15,300 MW. Duke Energy North America conducts business throughout
the United States and Canada through Duke Energy North America, LLC and Duke
Energy Trading and Marketing, LLC. Duke Energy Trading and Marketing is
approximately 40% owned by Exxon Mobil Corporation. Prior to April 1, 2002, the
Duke Energy North America business segment was combined with Duke Energy
Merchants Holdings, LLC to form a segment called North American Wholesale
Energy. As of June 30, 2002, management combined Duke Energy Merchants Holdings
with the Other Energy Services segment. Management separated Duke Energy North
America for increased reporting transparency. Previous periods have been
reclassified to conform to the current presentation. As of August 1, 2002, Duke
Energy's North American trading and marketing functions that were in DENA and
Duke Energy Merchants Holdings, including Duke Energy Trading and Marketing and
the Canadian trading operations, were consolidated into one group.

     INTERNATIONAL ENERGY develops, operates and manages natural gas
transportation and power generation facilities and engages in energy trading and
marketing of natural gas and electric power. Our current operating portfolio
includes approximately 5,300 MW of power generation facilities and approximately
                                       S-2


2,200 miles of natural gas pipelines. International Energy conducts operations
primarily through Duke Energy International, LLC and its activities target the
Latin American, Asia-Pacific and European regions.

     OTHER ENERGY SERVICES is composed of diverse energy businesses, operating
primarily through Duke Energy Merchants Holdings, Duke/Fluor Daniel and Energy
Delivery Services. Duke Energy Merchants Holdings engages in commodity buying
and selling, and risk management and financial services in the energy commodity
markets other than natural gas and power (such as refined products, liquefied
petroleum gas, residual fuels, crude oil and coal). Duke/Fluor Daniel provides
comprehensive engineering, procurement, construction, commissioning and
operating plant services for fossil-fueled electric power generating facilities
worldwide. It is a 50/50 partnership between Duke Energy and Fluor Enterprises,
Inc., a wholly owned subsidiary of Fluor Corporation. Energy Delivery Services
is an engineering, construction, maintenance and technical services firm
specializing in electric transmission and distribution lines and substation
projects. It was formed in the second quarter of 2002 from the power delivery
services component of Duke Engineering & Services, Inc. This unit was excluded
from the sale of Duke Engineering & Services on April 30, 2002. Other Energy
Services also retained the portion of DukeSolutions, Inc. that was not sold on
May 1, 2002. Duke Engineering & Services and DukeSolutions were included in
Other Energy Services through the date of their sale.

     DUKE VENTURES is composed of other diverse businesses, operating primarily
through Crescent Resources, LLC, DukeNet Communications, LLC and Duke Capital
Partners, LLC. Crescent Resources develops high-quality commercial, residential
and multi-family real estate projects and manages land holdings primarily in the
southeastern and southwestern United States. DukeNet Communications develops and
manages fiber optic communications systems for wireless, local and long distance
communications companies and selected educational, governmental, financial and
health care entities. Duke Capital Partners, a wholly owned merchant banking
company, provides debt and equity capital and financial advisory services
primarily to the energy industry.

BUSINESS STRATEGY

     Our strategy is to develop, operate and actively manage integrated energy
businesses in targeted regions where our extensive capabilities in developing
energy assets, operating electric power, natural gas and NGL facilities,
optimizing commercial operations and managing risk can provide comprehensive
energy solutions for our customers and create value for our shareholders. The
key elements of our strategy include:

     DELIVER ENERGY AND ENERGY-RELATED PRODUCTS AND SERVICES TO CUSTOMERS
WORLDWIDE.  In North America, we own and operate natural gas pipeline
infrastructure, regulated and merchant power generation facilities, and natural
gas gathering and processing facilities. We also market and trade a variety of
energy commodities, including natural gas, power, NGLs and refined products. We
provide structured origination and risk management expertise to customers across
the energy spectrum. Internationally, we own and operate integrated electric and
natural gas businesses in markets such as Latin America, Asia Pacific and
Europe, where deregulation, privatization and liberalization are opening energy
markets to competition.

     ACTIVELY MANAGE OUR ASSET PORTFOLIO.  We utilize a portfolio management
strategy, rather than focusing on stand-alone projects or assets, that strives
to capture the greatest value by seeking opportunities to invest in energy
assets in markets that have capacity needs and to divest other assets when
significant value can be realized. This strategy enables us to monetize certain
assets and maintain financial flexibility to pursue other attractive
opportunities. Additionally, this strategy prevents the institutionalized
ownership of any asset by encouraging us to continually optimize our asset
portfolio.

     MITIGATE EXPOSURE THROUGH DISCIPLINED RISK MANAGEMENT POLICIES.  Through
our enterprise risk management group, we actively manage the risks that our
business segments face. We believe managing risk at the corporate level is
consistent with the portfolio approach we use with our assets. Our risk
management policies are designed to help determine lines of business offering
attractive risk returns, assess current and future risk/return characteristics
of the enterprise and recommend appropriate strategic modifications. We actively
manage our commodity, interest rate, foreign currency and credit risks through
                                       S-3


established policies that limit our exposure and require daily reporting to
management of potential financial exposure. Our risk management policies are
designed to mitigate our downside exposures while complementing the operations
of each of our business segments.

RECENT DEVELOPMENTS

     On September 20, 2002, Duke Energy announced a reduction in earnings
estimates for 2002. We currently estimate earnings for 2002 to be $1.95 to $2.05
per share, before the effect of the one-time charges discussed below. This
reduction in estimated earnings was driven primarily by the severely weakened
merchant energy markets served by DENA. We estimate that ongoing earnings for
the second half of 2002 will most likely be split approximately 60% for the
third quarter and approximately 40% for the fourth quarter.

     We also announced that we have reduced our capital expenditure plans in
response to prevailing market conditions in order to maintain financial
flexibility. While capital spending of between $6 billion and $8 billion was
initially expected for 2002, we have determined that our capital expenditure
plans for the year will be $6.2 billion, excluding the acquisition of Westcoast
Energy. Capital spending for the year 2003 has also been reduced to a planned
$3.5 billion, all of which the Company intends to fund through internal cash
flow, after dividend payments, and including limited asset sales.

     We also announced our decision to defer construction of three DENA natural
gas-fueled generating facilities slated for commercial operation in 2003 in
response to the current conditions in the wholesale energy market in the Western
United States. The deferrals will remain in place until market conditions and
demand for additional generation in the region improves. The facilities include
the Grays Harbor Facility in Grays Harbor County, Washington, the Deming Energy
Facility in Luna County, New Mexico and the Moapa Energy Facility in Clark
County, Nevada. However, we will continue construction activities of the Fayette
Energy Facility in Fayette County, Pennsylvania and the Hanging Rock Energy
Facility in Lawrence County, Ohio.

     In addition, we will be negotiating new terms for the purchase of turbines
and associated equipment from General Electric. This renegotiation, along with
the construction deferrals and the write-off of associated demobilization costs
and certain site development costs, could result in a one-time charge in the
range of $250 to $300 million to be taken against Duke Energy's earnings for the
third quarter 2002.

                                       S-4


                                  THE OFFERING

Common stock offered..........   52,000,000 shares

Common stock to be outstanding
after this offering...........   885,179,657 shares

Use of proceeds...............   Repayment of indebtedness incurred in
                                 connection with our acquisition of Westcoast.

New York Stock Exchange
symbol........................   "DUK"

     The number of shares of common stock offered and to be outstanding after
this offering does not include 7,800,000 shares of common stock that the
underwriters have an option to purchase from us within 30 days of the date of
this prospectus supplement to cover over-allotments.

     The number of shares of common stock to be outstanding after this offering
is based on 833,179,657 shares outstanding as of July 31, 2002.

                                       S-5


                   SUMMARY CONSOLIDATED FINANCIAL INFORMATION

     The summary consolidated financial information set forth below should be
read in conjunction with our consolidated financial statements and the related
notes and other financial and operating data incorporated by reference in this
prospectus supplement and the accompanying prospectus.



                                           SIX MONTHS ENDED             YEARS ENDED
                                               JUNE 30,                DECEMBER 31,
                                           -----------------   -----------------------------
                                            2002      2001      2001       2000(1)   1999(2)
                                           -------   -------   -------     -------   -------
                                                 (IN MILLIONS, EXCEPT PER SHARE DATA)
                                                                      
CONSOLIDATED STATEMENTS OF INCOME DATA:
Operating revenues.......................  $28,218   $32,071   $59,503     $49,318   $21,766
Earnings before interest and taxes.......    1,808     2,156     4,256       4,014     2,043
Earnings available for common
  stockholders...........................      849       869     1,884(3)    1,757     1,487(4)
Weighted-average common shares
  outstanding(5).........................      809       759       767         736       729
Earnings per common share (before
  extraordinary item and cumulative
  effect of change in accounting
  principle)(5)
  Basic..................................  $  1.05   $  1.27   $  2.58     $  2.39   $  1.13
  Diluted................................     1.04      1.26      2.56        2.38      1.13
Earnings per common share(5)
  Basic..................................  $  1.05   $  1.14   $  2.45(3)  $  2.39   $  2.04(4)
  Diluted................................     1.04      1.13      2.44(3)     2.38      2.03(4)
Dividends per common share(5)............    0.825     0.825      1.10        1.10      1.10




                                                               AS OF        AS OF
                                                              JUNE 30,   DECEMBER 31,
                                                                2002         2001
                                                              --------   ------------
                                                                   (IN MILLIONS)
                                                                   
CONSOLIDATED BALANCE SHEET DATA:
Total assets................................................  $65,192      $48,375
Short-term debt, including commercial paper.................    2,673        1,603
Long-term debt, including current maturities................   19,337       12,582
Guaranteed preferred beneficial interests in subordinated
  notes of Duke Energy or subsidiaries......................    1,407        1,407
Minority interests..........................................    2,996        2,246
Preferred and preference stock, including current sinking
  fund obligations..........................................      247          247
Common stockholders' equity.................................   14,887       12,689


---------------

(1) Reflects a pre-tax $407 million gain on the sale of our investment in
    BellSouth PCS. The effect per basic share of common stock of this gain was
    $0.34.

(2) Reflects a pre-tax $800 million charge for estimated injury and damages
    claims. The effect per basic share of common stock of this charge was $0.67.

(3) Reflects a net-of-tax cumulative effect adjustment of $96 million, or $0.13
    per basic share of common stock, as a reduction in earnings in accordance
    with our adoption of Statement of Financial Accounting Standards No. 133.

(4) Reflects a one-time after-tax extraordinary gain of approximately $660
    million, or $0.91 per basic share of common stock, attributable to the sale
    of certain pipeline operations on March 29, 1999.

(5) Years ended December 31, 1999 and 2000 have been restated to reflect the
    two-for-one common stock split effective January 26, 2001.

                                       S-6


                                  RISK FACTORS

     Before purchasing our common stock, you should carefully consider the
following risk factors as well as the other information contained in this
prospectus supplement, the accompanying prospectus and the information
incorporated by reference in order to evaluate an investment in our common
stock.

RISKS RELATED TO THE MARKET CYCLE OF OUR INDUSTRY

     OUR SALES AND RESULTS OF OPERATIONS MAY BE NEGATIVELY AFFECTED BY SUSTAINED
LOW LEVELS IN THE MARKET PRICES OF COMMODITIES THAT ARE BEYOND OUR CONTROL.

     We sell power from our generation facilities into the spot market or other
competitive power markets on a contractual basis. We also enter into contracts
to purchase and sell electricity, natural gas and NGLs as part of our power
marketing and energy trading operations. With respect to such transactions, we
are not guaranteed any rate of return on our capital investments through
mandated rates, and our revenues and results of operations are likely to depend,
in large part, upon prevailing market prices for power in our regional markets
and other competitive markets. These market prices may fluctuate substantially
over relatively short periods of time. It is reasonable to expect that trading
margins will erode as new entrants enter the market, thus leading to an
oversupply in the market, and that there may be diminished opportunities for
gain should low prices decline further. These factors could reduce our revenues
and margins and therefore diminish our results of operations.

     Low market prices for electricity, natural gas and NGLs result from
multiple factors, including:

     - weather conditions;

     - seasonality;

     - supply of and demand for energy commodities;

     - illiquid markets;

     - general economic conditions, including downturns in the U.S. or other
       economies which impacts consumption;

     - transmission or transportation constraints or inefficiencies;

     - availability of competitively priced alternative energy sources;

     - natural gas, crude oil, refined products and coal production levels;

     - electric generation capacity;

     - capacity and transmission service into, or out of, our markets;

     - natural disasters, wars, embargoes and other catastrophic events; and

     - federal, state and foreign energy and environmental regulation and
       legislation.

     RECENT DEVELOPMENTS AFFECTING THE WHOLESALE POWER AND ENERGY TRADING
MARKETS HAVE REDUCED MARKET ACTIVITY AND LIQUIDITY AND MAY CONTINUE TO ADVERSELY
AFFECT OUR RESULTS OF OPERATIONS.

     As a result of the energy crisis in California during the summer of 2001,
the recent decline of natural gas prices in North America, the filing of
bankruptcy by Enron Corporation, and investigations by governmental authorities
into energy trading activities and increased litigation related to such
inquiries, companies generally in the regulated and unregulated utility
businesses have been impacted negatively. In addition, certain participants have
been forced to exit from the energy trading markets, leading to a reduction in
the number of trading partners and lower trading revenues. Recent short term,
depressed spot and forward wholesale power prices during the past summer months
have resulted in substantially reduced revenues in our merchant energy business
and may continue to affect our earnings.

                                       S-7


     WE MAY NOT BE ABLE TO SUCCESSFULLY MANAGE THE RISKS ASSOCIATED WITH SELLING
AND MARKETING PRODUCTS IN THE WHOLESALE POWER MARKETS.

     We purchase and sell power at the wholesale level under the Federal Energy
Regulatory Commission's, or FERC's, market-based tariffs throughout the United
States and also enter into short-term agreements to market available energy and
capacity from our generation assets with the expectation of profiting from
market price fluctuations. If we are unable to deliver firm capacity and energy
under these agreements, then we could be required to pay damages. These damages
would be based on the difference between the market price to acquire replacement
capacity or energy and the contract price of the undelivered capacity or energy.
Depending on price volatility in the wholesale energy markets, such damages
could be significant.

     In the absence or upon expiration of power sales agreements, we must sell
all or a portion of the energy, capacity and other products from our facilities
into the competitive wholesale power markets. Unlike most other commodities,
electricity cannot be stored and must be produced concurrently with its use. As
a result, the wholesale power markets are subject to significant price
fluctuations over relatively short periods of time and can be unpredictable. In
addition, the price we can obtain for power sales may not change at the same
rate as changes in fuel costs. Given the volatility and potential for material
differences between actual power prices and fuel costs, if we are unable to
secure long-term purchase agreements for our power generation facilities, our
revenues would be subject to increased volatility and our financial results may
be materially adversely affected.

     OUR RISK MANAGEMENT PROCEDURES MAY NOT PREVENT LOSSES.

     We actively manage the commodity price risk inherent in our energy, debt
and foreign currency positions. Although we have sophisticated risk management
systems in place that use advanced methodologies to quantify risk, these systems
may not always be followed or may not always work as planned. If prices
significantly deviate from historic prices, our risk management systems may not
protect us from significant losses. Adverse changes in energy prices, interest
rates and foreign currency exchange rates may result in economic losses in our
earnings and cash flows and our balance sheet under applicable accounting rules.
Although we devote a considerable amount of management effort to our trading,
marketing and risk management systems, their effectiveness remains uncertain.

     OUR HEDGING PROCEDURES MAY NOT PROTECT OUR SALES AND NET INCOME FROM
VOLATILITY.

     To lower our financial exposure related to commodity price fluctuations,
our marketing, trading and risk management operations routinely enter into
contracts to hedge the value of our assets and operations. As part of this
strategy, we routinely utilize fixed-price, forward, physical purchase and sales
contracts, futures, financial swaps and option contracts traded in the
over-the-counter markets or on exchanges. However, we do not always cover the
entire exposure of our assets or our positions to market price volatility and
the coverage will vary over time. To the extent we have unhedged positions or
our hedging procedures do not work as planned, fluctuating commodity prices
could cause our sales and net income to be volatile.

     WE ARE EXPOSED TO MARKET RISK AND MAY INCUR LOSSES FROM OUR MARKETING AND
TRADING OPERATIONS.

     Our trading portfolios consist of contracts to buy and sell commodities,
including contracts for electricity, natural gas, NGLs and other commodities
that are settled by the delivery of the commodity or cash. If the values of
these contracts change in a direction or manner that we do not anticipate, we
could realize material losses from our trading activities.

     In the past, certain marketing and trading companies have experienced
severe financial problems due to price volatility in the energy commodity
markets. In certain instances this volatility has caused companies to be unable
to deliver power that they had guaranteed under contract. These defaults
severely and adversely impacted the financial condition of these companies and,
in some cases, have resulted in losses to their trading partners.

                                       S-8


     We have marketing and trading operations which target the U.S., Canada and
Latin American, Asia-Pacific and European regions. We incur similar trading
risks and market exposures in these foreign markets. If our trading volumes in
these regions increase, we will be exposed to increased market risks.

     OUR PROFITABILITY MAY DECLINE IF THE COUNTERPARTIES TO OUR TRANSACTIONS
FAIL TO PERFORM IN ACCORDANCE WITH OUR AGREEMENTS WITH THEM.

     Our marketing, trading and risk management operations are exposed to the
risk that counterparties to our transactions will not perform their obligations.
Should the counterparties to these arrangements fail to perform, we might be
forced to acquire alternative hedging arrangements, honor the underlying
commitment at then-current market prices or return a significant portion of the
consideration received for unused electricity or gas under a long-term contract.
In such event, we might incur additional losses to the extent of amounts, if
any, already paid to, or received from, counterparties. In addition, in our
marketing and trading activities, we often extend credit to our trading
counterparties. Despite performing credit analysis prior to extending credit, we
are exposed to the risk that we may not be able to collect amounts owed to us.
If the counterparty to such a financing transaction fails to perform and any
collateral we have secured is inadequate, we will lose money.

     In 2000 and 2001, tight supply and increased demand resulted in higher
wholesale power prices to utilities, particularly in California. At the same
time, two of the three major utilities in California operated under a retail
rate freeze. As a result, there has been significant under-recovery of costs by
these utilities, resulting in the filing by one utility under Chapter 11 of the
U.S. Bankruptcy Code. Some utilities have suspended payments to their creditors.
If any industry participants are adversely affected by the situation in
California or other similar situations that may develop in the future in other
markets, such participants may default on obligations to us, which would affect
the profitability of our marketing and trading business.

     COMPETITION IN THE WHOLESALE POWER AND ENERGY TRADING MARKETS MAY ADVERSELY
AFFECT THE GROWTH AND PROFITABILITY OF OUR BUSINESS.

     While companies in the regulated and unregulated utility business have been
universally negatively affected by recent events in the energy markets, it is
possible that in the future we may be vulnerable to competition from new
competitors that have greater financial resources than we do, seeking attractive
opportunities to acquire or develop energy assets or energy trading operations
both in the United States and abroad. These new competitors may include
sophisticated financial institutions, some of which are already entering the
energy trading and marketing sector, and international energy players. This
competition may adversely affect our ability to make investments or
acquisitions.

     We may not be able to respond in a timely or effective manner to the many
changes intended to increase competition in the electricity industry. To the
extent competitive pressures increase and the pricing and sale of electricity
assumes more characteristics of a commodity business, the economics of our
business may come under long-term pressure.

     In addition, regulatory changes have also been proposed to increase access
to electricity transmission grids by utility and non-utility purchasers and
sellers of electricity. We believe that these changes could continue the
disaggregation of many vertically-integrated utilities into separate generation,
transmission, distribution and retail businesses. As a result, a significant
number of additional competitors could become active in the wholesale power
generation segment of our industry.

     Although demand for electricity is generally increasing throughout the
United States, the rate of construction and development of new, more efficient
electric generation facilities may exceed increases in demand in some regional
electric markets and have an adverse impact on our results of operations. Also,
industry restructuring in regions in which we have substantial operations could
affect our operations in a manner that is difficult to predict.

                                       S-9


     OUR OPERATING RESULTS MAY FLUCTUATE ON A SEASONAL AND QUARTERLY BASIS.

     Electric power generation and gas transmission are generally seasonal
businesses. In many parts of the country, demand for power peaks during the hot
summer months, with market prices also peaking at that time. In other areas,
demand for power peaks during the winter. In addition, demand for gas and other
fuels peaks during the winter, especially for our Westcoast business in Canada.
As a result, our overall operating results in the future may fluctuate
substantially on a seasonal basis. The pattern of this fluctuation may change
depending on the nature and location of our facilities and pipeline systems and
the terms of power sale contracts and gas transmission arrangements we enter
into.

RISKS RELATED TO LEGAL PROCEEDINGS AND REGULATORY INVESTIGATIONS

     WE MAY BE ADVERSELY AFFECTED BY LEGAL PROCEEDINGS ARISING OUT OF THE
ELECTRICITY SUPPLY SITUATION IN CALIFORNIA AND OTHER WESTERN STATES.

     Litigation arising out of the California electricity supply situation has
been filed with the FERC and in California courts against sellers of energy to
the California Independent System Operator. The plaintiffs and intervenors in
these proceedings allege abuse of market power, manipulation of market prices,
unfair trade practices and violations of state antitrust laws, among other
things, and seek price caps on wholesale sales in California and other western
power markets, refunds of excess profits allegedly earned on these sales, and
other relief, including treble damages and attorneys' fees. Duke Energy and some
of its subsidiaries have been named as defendants, among other corporate and
individual defendants, in one or more of a total of 14 lawsuits brought by or on
behalf of electricity purchasers in California, with one suit filed on behalf of
a Washington State electricity purchaser. In addition to lawsuits, several
investigations and regulatory proceedings at the state and federal levels are
looking into the causes of high wholesale electricity prices in the western U.S.
An investigation by the California Public Utilities Commission recently alleged
that we were among five energy companies that withheld electricity from their
California plants, resulting in sharp increases in California electricity
prices. We cannot predict the outcome of any such proceedings or whether the
ultimate impact on us of the electricity supply situation in California and
other western states will be material.

     WE MAY BE ADVERSELY AFFECTED BY REGULATORY INVESTIGATIONS AND ANY RELATED
LEGAL PROCEEDINGS RELATED TO THE CONDUCTING OF ANY "ROUNDTRIP" TRADES BY OUR
ENERGY TRADING BUSINESS.

     Public and regulatory scrutiny of the energy industry and of the capital
markets has resulted in increased regulation being either proposed or
implemented. In particular, the activities of Enron Corporation and other energy
traders in allegedly using "roundtrip" trades which involve the prearrangement
of simultaneously executed and offsetting buy and sell trades for the purpose of
increasing reported revenues or trading volumes, or influencing prices and which
lack a legitimate business purpose, has resulted in increased public and
regulatory scrutiny. To date, we have responded to requests for information from
the FERC, related to an investigation of natural gas transactions in the western
U.S. and Texas markets during the years 2000 and 2001, and the Securities and
Exchange Commission, or SEC, related to an investigation of "roundtrip" energy
transactions from January 1999 to the present. We also have received and are
responding to subpoenas and supplemental requests for information regarding gas
and power trading activities from the Houston office of the U.S. Attorney
relating to a Houston grand jury inquiry, which involve the same issues and time
period covered by the SEC requests, and from the Commodity Futures Trading
Commission.

     Such inquiries are ongoing and continue to adversely affect the energy
trading business as a whole. We may see these adverse effects continue as a
result of the uncertainty of these ongoing inquiries or additional inquiries by
other federal or state regulatory agencies. In addition, we cannot predict the
outcome of any of these inquiries, including the grand jury inquiry, or whether
these inquiries will lead to additional legal proceedings against us, civil or
criminal fines or penalties, or other regulatory action, including legislation,
which may be materially adverse to the operation of our trading business and our
trading revenues and net income or increase our operating costs in other ways.

                                       S-10


     Also, several class action lawsuits have been filed against us, and others
may be filed, claiming that investors suffered damages as a result of the
alleged roundtrip trades inflating our revenue and earnings. Such lawsuits could
lead to settlements, civil damages or other litigation costs that could be
adverse to our business.

RISKS RELATED TO THE REGULATION OF OUR BUSINESSES

ELECTRIC

     OUR BUSINESSES IN NORTH AMERICA ARE SUBJECT TO COMPLEX GOVERNMENT
REGULATIONS. THE ECONOMICS, INCLUDING THE COSTS, OF OPERATING OUR GENERATING
FACILITIES MAY BE ADVERSELY AFFECTED BY CHANGES IN THESE REGULATIONS OR IN THEIR
INTERPRETATION OR IMPLEMENTATION.

     The regulatory environment applicable to the electric power industry has
recently undergone substantial changes, both on a federal and a state level,
which have had a significant impact on the nature of the industry and the manner
in which its participants conduct their businesses. These changes are ongoing
and we cannot predict the future course of changes in this regulatory
environment or the ultimate effect that this changing regulatory environment
will have on our business.

     We are subject to regulation by the SEC under the Public Utility Holding
Company Act, or PUHCA, and the Federal Power Act, or FPA, which regulate public
utility holding companies and their subsidiaries and place certain constraints
on the conduct of their business. The rates charged by our domestic utility
subsidiaries are approved by the FERC, the North Carolina Utilities Commission,
or the NCUC, and the South Carolina Public Service Commission, or the SCPSC. The
NCUC and the SCPSC regulate many aspects of our utility operations including
siting and construction of facilities, customer service and the rates that we
can charge customers. The FERC regulates wholesale electricity operations and
transmission rates and the state commissions regulate retail generation and
distribution rates. The Public Utility Regulatory Policies Act of 1978, or
PURPA, provides qualifying facilities with exemptions from some federal and
state laws and regulations, including PUHCA and most provisions of the FPA. The
Energy Policy Act of 1992, or the Energy Act, also provides relief from
regulation under PUHCA to "exempt wholesale generators." Maintaining the status
of our facilities as qualifying facilities or exempt wholesale generators is
conditioned on those facilities continuing to meet statutory criteria. Under
current law, we are not and will not be subject to regulation as a registered
holding company under PUHCA as long as the domestic power plants we own are
qualifying facilities under PURPA or are exempt wholesale generators. If we were
subject to these regulations, the economics and operations of our generating
facilities could be negatively affected by the increased costs associated with
upgrading our facilities and taking other actions to comply with these
regulations. While we are currently exempt from registration under PUHCA, we may
lose that exemption if we fail to comply with our exemptive order from the SEC.
If we were to lose our exemption, we would have the alternatives of registering
as a holding company which would subject us to more extensive regulation, or
divesting or changing the nature of some of our foreign utility holdings,
including some facilities acquired in our Westcoast purchase.

     Existing regulations may be revised or reinterpreted, new laws and
regulations may be adopted or become applicable to us or our facilities, and
future changes in laws and regulations may have a detrimental effect on our
business. Certain restructured markets have recently experienced supply problems
and price volatility. These supply problems and volatility have been the subject
of a significant amount of press coverage, much of which has been critical of
the restructuring initiatives. In some of these markets, including California,
proposals have been made by governmental agencies and other interested parties
to re-regulate areas of these markets which have previously been deregulated. We
cannot assure you that other proposals to re-regulate will not be made or that
legislative or other attention to the electric power restructuring process will
not cause the deregulation process to be delayed or reversed. If the current
trend towards competitive restructuring of the wholesale and retail power
markets is reversed, discontinued or delayed, our business models may be
inaccurate and we may face difficulty in growing our business and generating
revenues in accordance with our current business plans.

     The FERC has proposed to broaden its regulations that restrict relations
between jurisdictional electric and natural gas companies, or "jurisdictional
companies," and marketing affiliates. The proposed
                                       S-11


rules would limit communications between a jurisdictional company and all our
affiliates engaged in energy activities. The rulemaking is pending at the FERC
and the precise scope and effect of the rule is unclear. If adopted as proposed,
the rule could adversely affect our ability to coordinate and manage our energy
activities.

     OUR SALES MAY DECREASE IF WE ARE UNABLE TO GAIN ADEQUATE, RELIABLE AND
AFFORDABLE ACCESS TO TRANSMISSION AND DISTRIBUTION ASSETS DUE TO THE FERC AND
REGIONAL REGULATION OF WHOLESALE MARKET TRANSACTIONS FOR ELECTRICITY AND GAS.

     We depend on transmission and distribution facilities owned and operated by
utilities and other energy companies to deliver the electricity and natural gas
we sell to the wholesale market, as well as the natural gas we purchase to
supply some of our electric generation facilities. If transmission is disrupted,
or if capacity is inadequate, our ability to sell and deliver products may be
hindered.

     The FERC has issued power transmission regulations that require wholesale
electric transmission services to be offered on an open-access,
non-discriminatory basis. Although these regulations are designed to encourage
competition in wholesale market transactions for electricity, some companies
have failed to provide fair and equal access to their transmission systems or
have not provided sufficient transmission capacity to enable other companies to
transmit electric power. We cannot predict whether and to what extent the
industry will comply with these initiatives, or whether the regulations will
fully accomplish their objectives. In addition, other companies' ability to
access and compete for our existing "native-load" transmission customers may
negatively affect our business leading to declining prices for transmission
services as a result of this competition.

     In addition, the independent system operators who oversee the transmission
systems in regional power markets, such as California, have in the past been
authorized to impose, and may continue to impose, price limitations and other
mechanisms to address volatility in the power markets. These types of price
limitations and other mechanisms may adversely impact the profitability of our
wholesale power marketing and trading. Given the extreme volatility and lack of
meaningful long-term price history in many of these markets and the imposition
of price limitations by regulators, independent system operators or other market
operators, we can offer no assurance that we will be able to operate profitably
in all wholesale power markets.

     IN THE FUTURE, WE MAY NOT BE ABLE TO SECURE LONG-TERM PURCHASE AGREEMENTS
FOR OUR POWER GENERATION FACILITIES, AND OUR EXISTING POWER PURCHASE AGREEMENTS
MAY NOT BE ENFORCEABLE, EITHER OF WHICH WOULD SUBJECT OUR SALES TO INCREASED
VOLATILITY.

     Historically, power from generation facilities has been sold under
long-term power purchase agreements pursuant to which all energy and capacity
was generally sold to a single party at fixed prices. Because of changes in the
industry, the percentage of facilities with these types of long-term power
purchase agreements has decreased, and it is likely that most of our facilities
will operate without these agreements. Without the benefit of long-term power
purchase agreements, we cannot assure you that we will be able to sell the power
generated by our facilities or that our facilities will be able to operate
profitably.

     Recently, some entities have brought litigation or regulatory proceedings
aimed at forcing the renegotiation or termination of power purchase agreements
requiring payments to owners of generating facilities that are qualifying
facilities under PURPA. Many qualifying facilities sell their electric output to
utilities and other entities pursuant to long-term contracts at prices that are
based upon the incremental cost that, at the time of contracting, it was
estimated that it would cost the utility or entity to generate or purchase the
power from another source. In some cases, these prices are now substantially in
excess of market prices. In addition, in the future, utilities and other
entities, with the approval of federal or state regulatory authorities, could
seek to abrogate their existing power purchase agreements with qualifying
facilities or with other power generators. Some of our power purchase agreements
for power generated from our independent power projects and generation assets
could be subject to similar efforts by the

                                       S-12


entities who contract to purchase power from our facilities. If those efforts
were to be successful, our sales could decrease or be subject to increased
volatility.

     THE DIFFERENT REGIONAL POWER MARKETS IN WHICH WE COMPETE OR WILL COMPETE IN
THE FUTURE HAVE CHANGING REGULATORY STRUCTURES, WHICH COULD AFFECT OUR GROWTH
AND PERFORMANCE IN THESE REGIONS.

     Our results are likely to be affected by differences in the market and
transmission regulatory structures in various regional power markets. Problems
or delays that may arise in the formation and operation of new regional
transmission organizations, or RTOs, may restrict our ability to sell power
produced by our generating capacity to certain markets if there is insufficient
transmission capacity otherwise available. The rules governing the various
regional power markets may also change from time to time which could affect our
costs or revenues. Because it remains unclear which companies will be
participating in the various regional power markets, or how RTOs will develop or
what regions they will cover, we are unable to assess fully the impact that
these power markets may have on our business.

     Currently, Franchised Electric operates with exclusive rights to supply
electricity in a franchised service territory of 22,000 square miles in North
Carolina and South Carolina. Our financial performance in our franchised service
territory is likely to be affected by differences in the market and regulatory
structures in various regional power markets. Problems that may arise in the
formation and operation of new RTOs, may result in delayed or disputed
collection of revenues. The rules governing the various regional power markets
may also change from time to time which could affect our costs or revenues.
Because it remains unclear which companies will be participating in the various
regional power markets, or how RTOs will develop or what regions they will
cover, we are unable to assess fully the impact that these power markets may
have on our business.

     THE RECENTLY ENACTED RATE FREEZE AFFECTING OUR NORTH CAROLINA UTILITY WILL
LIMIT OUR ABILITY TO PASS ON TO OUR CUSTOMERS OUR COST OF PRODUCING ELECTRICITY.

     In June 2002, the State of North Carolina passed new clean air legislation
that freezes electric utility rates from June 20, 2002 to December 31, 2007, in
order for North Carolina electric utilities, including Duke Energy, to make
significant reductions in emissions of sulfur dioxide and nitrogen oxides from
the state's coal-fired power plants over the next ten years. We estimate the
cost of achieving the proposed emission reductions to be approximately $1.5
billion. While we expect to recover 70% of the total estimated costs of plant
improvements through the terms of the legislation, there is no guarantee that we
will recover such amount. In addition, it is unclear how the NCUC will determine
how any remaining costs will be recovered. As a result of the rate freeze, we
will be limited in the amount of revenue our North Carolina utility generates in
relation to operational costs, such as fuel supplies, and the amount of recovery
for our costs of emission reductions.

GAS

     OUR GAS TRANSMISSION AND STORAGE OPERATIONS ARE SUBJECT TO GOVERNMENT
REGULATIONS AND RATE PROCEEDINGS THAT COULD HAVE AN ADVERSE IMPACT ON OUR
ABILITY TO RECOVER THE COSTS OF OPERATING OUR PIPELINE FACILITIES.

     Our U.S. interstate gas transmission and storage operations conducted
through Duke Energy Gas Transmission Corporation and its subsidiaries are
subject to the FERC's rules and regulations in accordance with the Natural Gas
Act of 1938 and the Natural Gas Policy Act of 1978. The FERC's regulatory
authority extends to:

     - transportation of natural gas;

     - rates and charges;

     - construction;

     - acquisition, extension or abandonment of services or facilities;

     - accounts and records;
                                       S-13


     - depreciation and amortization policies; and

     - operating terms and conditions of service.

     The FERC has taken certain actions to strengthen market forces in the
natural gas pipeline industry which has led to increased competition throughout
the industry. In a number of key markets, interstate pipelines are now facing
competitive pressure from other major pipeline systems, enabling local
distribution companies and end users to choose a supplier or switch suppliers
based on the short-term price of gas and the cost of transportation.

     In 2000, the FERC issued Order 637, which sets forth revisions to its
policies governing the regulation of interstate natural gas pipelines. Some of
our pipeline and storage companies were among several parties who filed appeals
in the District of Columbia Circuit Court of Appeals seeking court review of
various aspects of the Order. Based on the court's order, FERC issued an interim
policy on certain of the issues remanded by the court and has requested comments
on the remanded issues. We have filed comments with the FERC, and the matter is
now pending before the FERC. We made an Order 637 compliance filing with the
FERC during 2001. The FERC issued orders approving, subject to modifications,
the pro forma tariff sheets submitted by us. However, we have filed for
rehearing of the order with respect to certain issues. The matter is now pending
before the FERC. Given the extent of the FERC's regulatory power, we cannot give
any assurance regarding the likely regulations under which we will operate our
natural gas transmission and storage business in the future or the effect of
regulation on our financial position and results of operations. In addition, the
FERC has proposed to broaden its regulations on jurisdictional companies, as
described above. The proposed rules would limit communications between a
jurisdictional company and all our affiliates engaged in gas transmission
activities. The rulemaking is pending at the FERC and the precise scope and
effect of the rule is unclear. If adopted as proposed, the rule could adversely
affect our ability to coordinate and manage our energy activities.

     Texas Eastern and Algonquin currently have in effect rate settlements
approved by FERC which prevent those companies or third parties from modifying
Texas Eastern and Algonquin's rates, except for certain allowed adjustments.
These settlements do not preclude the FERC from taking action on its own to
modify the rates. The Texas Eastern settlement will expire on December 31, 2003
and the Algonquin settlement will expire on May 1, 2003, at which time the
companies or third parties may institute actions at the FERC to modify the
companies' rates. It is not possible to determine at this time whether any such
actions would be instituted or what the outcome would be but such proceedings
could result in either Texas Eastern or Algonquin being required to adjust its
rates.

     POSSIBLE CHANGES AND DEVELOPMENTS IN THE CANADIAN REGULATORY ENVIRONMENT
COULD RESULT IN A NEGATIVE IMPACT ON WESTCOAST'S BUSINESS AND OPERATIONS.

     Through the acquisition of Westcoast, we added a significant network of
mostly Canadian-based natural gas assets, including transmission pipeline,
gathering and processing facilities, storage facilities and distribution
systems. The majority of these assets are subject to various degrees of
regulation. Currently, Westcoast's interprovincial gathering, processing and
transmission facilities and operations, are regulated by the National Energy
Board and its storage and distribution facilities and operations are regulated
by various provincial regulatory authorities. Changes in the regulation of
Westcoast's facilities and operations may be beyond its control and may impact
its capacity to conduct its business effectively and sustain or increase
profitability. Furthermore, as the regulatory environment within which Westcoast
conducts its business and operates its facilities continues to evolve from a
traditional cost recovery model to a more competitive, market-based approach,
there is increasing competition among pipeline companies. We cannot predict the
timing or scope of these changes and developments in the regulatory environment
or the impact they may ultimately have on Westcoast's business and operations.

     A toll settlement approved by the National Energy Board establishes methods
for setting Westcoast's revenue requirements and tolls for transmission services
for a two-year period ending December 31, 2003. Upon its expiration, Westcoast
may renegotiate the toll settlement and/or apply to the National Energy

                                       S-14


Board to modify its tolls. It is not possible to predict the impact of these
alternative courses of action on Westcoast's tolls for transmission services.

     Westcoast's southern mainline and the Fort Nelson mainline systems are
currently fully contracted. The Fort St. John mainline continues to be
under-utilized by approximately 159 MMcf per day or 24% of its total
contractible capacity. Shippers with firm transmission service that expires on
October 31 of any year may give notice to Westcoast, prior to September 30 of
the previous year, to renew such service effective November 1. Approximately 55%
by volume of transmission service on the southern mainline and 40% by volume of
transmission service on the northern mainline is subject to renewal effective
November 1, 2003 and the balance at varying times thereafter.

     Aboriginal groups have claimed aboriginal and treaty rights over a
substantial portion of the lands on which Westcoast's facilities in British
Columbia and Alberta and the gas supply areas served by those facilities are
located. The existence of these claims, which range from the assertion of rights
of limited use up to aboriginal title, has given rise to some uncertainty
regarding access to public lands for future development purposes.

RISKS RELATED TO OUR BUSINESS GENERALLY AND OUR INDUSTRY

ENVIRONMENTAL REGULATION AND LIABILITY

     OUR BUSINESS WILL BE SUBJECT TO ENVIRONMENTAL LEGISLATION IN ALL
JURISDICTIONS IN WHICH IT OPERATES AND ANY CHANGES IN SUCH LEGISLATION COULD
NEGATIVELY AFFECT THE RESULTS OF OPERATIONS.

     Our operations are subject to extensive environmental regulation pursuant
to a variety of U.S., Canadian, and other federal, provincial, state and
municipal laws and regulations. Such environmental legislation imposes, among
other things, restrictions, liabilities and obligations in connection with the
generation, handling, use, storage, transportation, treatment and disposal of
hazardous substances and waste and in connection with spills, releases and
emissions of various substances into the environment. Environmental legislation
also requires that our facilities, sites and other properties associated with
our operations be operated, maintained, abandoned and reclaimed to the
satisfaction of applicable regulatory authorities.

     Existing environmental regulations could also be revised or reinterpreted,
new laws and regulations could be adopted or become applicable to us or our
facilities, and future changes in environmental laws and regulations could
occur. The federal government and several states recently have proposed
increased environmental regulation of many industrial activities, including
increased regulation of air quality, water quality and solid waste management.
For example, the U.S. Environmental Protection Agency has recently promulgated
more stringent air quality standards for particulate matter emitted from power
plants and is developing new policies concerning the protection of endangered
species and sediment contamination based on new interpretations of the Clean
Water Act. With the trend toward stricter standards, greater regulation, more
extensive permit requirements and an increase in the number and types of assets
operated by us subject to environmental regulation, we expect our environmental
expenditures to be substantial in the future.

     Compliance with environmental legislation can require significant
expenditures, including expenditures for clean up costs and damages arising out
of contaminated properties and failure to comply with environmental legislation
may result in the imposition of fines and penalties. The steps we take to bring
our facilities into compliance could be prohibitively expensive, and we may be
required to shut down or alter the operation of our facilities, which may cause
us to incur losses. Further, our regulatory rate structure and our contracts
with clients may not necessarily allow us to recover capital costs we incur to
comply with new environmental regulations such as the rate freeze being imposed
by the NCUC. Also, we may not be able to obtain or maintain from time to time
all required environmental regulatory approvals for certain development
projects. If there is a delay in obtaining any required environmental regulatory
approvals or if we fail to obtain and comply with them, the operation of our
facilities could be prevented or become subject to additional costs. Should we
fail to comply with all applicable environmental laws, we

                                       S-15


may be subject to penalties and fines imposed against us by regulatory
authorities. Although it is not expected that the costs of complying with
current environmental legislation will have a material adverse effect on our
financial condition or results of operations, no assurance can be made that the
costs of complying with environmental legislation in the future will not have
such an effect.

     WE COULD INCUR MATERIAL LOSSES IF WE ARE HELD LIABLE FOR THE ENVIRONMENTAL
CONDITION OF ANY OF OUR ASSETS.

     We are generally responsible for all on-site liabilities associated with
the environmental condition of our power generation facilities and natural gas
assets which we have acquired or developed, regardless of when the liabilities
arose and whether they are known or unknown. In addition, in connection with
certain acquisitions and sales of assets, we may obtain, or be required to
provide, indemnification against certain environmental liabilities. If we incur
a material liability, or the other party to a transaction fails to meet its
indemnification obligations to us, we could suffer material losses.

ACCOUNTING POLICY RISKS

     POTENTIAL CHANGES IN ACCOUNTING PRACTICES FOR THE ENERGY INDUSTRY MAY CAUSE
US TO REVISE OUR FINANCIAL DISCLOSURE IN THE FUTURE, WHICH MAY CHANGE THE WAY
ANALYSTS MEASURE OUR BUSINESS OR FINANCIAL PERFORMANCE.

     Recently discovered accounting irregularities in various industries have
forced regulators and legislators to take a renewed look at accounting
practices, financial disclosures, companies' relationships with their
independent auditors and retirement plan practices. While it is still unclear
what laws or regulations will develop, we cannot predict the ultimate impact of
any future changes in accounting regulations or practices in general with
respect to public companies or the energy industry or in our operations
specifically.

     In addition, new accounting standards could be enacted by the Financial
Accounting Standards Board or the SEC which could impact the way we are required
to record revenues, assets and liabilities. For instance, SFAS No. 143,
"Accounting for Asset Retirement Obligations," which we must implement by
January 1, 2003, will require that the fair value of a liability for an asset
retirement obligation be recognized in the period in which it is incurred, if a
reasonable estimate can be made. Such change in recognition could lead to an
increase in our liabilities related to certain assets, therefore reducing our
overall reported assets. Other future changes in accounting standards could lead
to negative impacts on reported earnings or increases in liabilities which in
turn could affect our reported results of operations.

FINANCING RISK

     OUR BUSINESS IS DEPENDENT ON OUR ABILITY TO SUCCESSFULLY ACCESS CAPITAL
MARKETS. OUR INABILITY TO ACCESS CAPITAL MAY LIMIT OUR ABILITY TO EXECUTE OUR
BUSINESS PLAN OR PURSUE IMPROVEMENTS.

     We rely on access to both short-term money markets and longer-term capital
markets as a source of liquidity for capital requirements not satisfied by the
cash flow from our operations. If we are not able to access capital at
competitive rates, our ability to implement our strategy will be adversely
affected. Certain market disruptions or a downgrade of our credit rating may
increase our cost of borrowing or adversely affect our ability to access one or
more financial markets. Such disruptions could include:

     - further economic downturns;

     - the bankruptcy of an unrelated energy company;

     - capital market conditions generally;

     - market prices for electricity and gas;

     - terrorist attacks or threatened attacks on our facilities or unrelated
       energy companies; or

     - the overall health of the utility industry.

     Restrictions on our ability to access financial markets may affect our
ability to execute our business plan as scheduled. An inability to access
capital may limit our ability to pursue improvements or acquisitions that we may
otherwise rely on for future growth.

                                       S-16


     INCREASES IN OUR LEVERAGE COULD ADVERSELY AFFECT OUR COMPETITIVE POSITION,
BUSINESS PLANNING AND FLEXIBILITY, FINANCIAL CONDITION, ABILITY TO SERVICE OUR
DEBT OBLIGATIONS AND TO PAY DIVIDENDS ON OUR COMMON STOCK, AND ABILITY TO ACCESS
CAPITAL ON FAVORABLE TERMS.

     Our cash requirements arise primarily from the capital intensive nature of
our electric utilities, as well as the expansion of our diversified businesses.
In addition to operating cash flows, we rely heavily on our commercial paper and
long-term debt. Our credit lines impose various limitations that could impact
our liquidity and result in a material adverse impact on our business strategy
and our ongoing financing needs. Changes in economic conditions could result in
higher interest rates, which would increase our interest expense on our floating
rate debt and reduce funds available to us for our current plans. Additionally,
an increase in our leverage could adversely affect us by:

     - increasing the cost of future debt financing;

     - prohibiting the payment of dividends on our common stock or adversely
       impacting our ability to pay such dividends at the current rate;

     - making it more difficult for us to satisfy our existing financial
       obligations;

     - limiting our ability to obtain additional financing, if we need it, for
       working capital, acquisitions, debt service requirements or other
       purposes;

     - increasing our vulnerability to adverse economic and industry conditions;

     - requiring us to dedicate a substantial portion of our cash flow from
       operations to payments on our debt, which would reduce funds available to
       us for operations, future business opportunities or other purposes; and

     - limiting our flexibility in planning for, or reacting to, changes in our
       business and the industry in which we compete.

     A DOWNGRADE IN OUR CREDIT RATING COULD NEGATIVELY AFFECT OUR ABILITY TO
ACCESS CAPITAL AND/OR TO OPERATE OUR POWER AND GAS TRADING BUSINESSES.

     Standard & Poor's Ratings Group, a division of The McGraw-Hill Companies,
Inc., and Moody's Investors Service, Inc. rate our senior, unsecured debt at A
and A1, respectively, with our Moody's rating on review for potential downgrade.
If Moody's or Standard & Poor's were to downgrade our long-term rating,
particularly below investment grade, our borrowing costs would increase which
would diminish our financial results. In addition, we would likely be required
to pay a high interest rate in future financings, and our potential pool of
investors and funding sources would likely decrease. Further, if our short-term
rating were to fall below A-1 or P-1, the current ratings assigned by Standard &
Poor's and Moody's, respectively, it would significantly limit our access to the
commercial paper market.

     Our power and gas trading businesses rely on our investment grade ratings.
Most of our counterparties require the creditworthiness of an investment grade
entity to stand behind transactions. If our ratings were to decline below
investment grade, our ability to profitably operate our power and gas trading
businesses would be diminished because we would likely have to deposit
collateral of cash or cash related instruments which would reduce our profits.

OPERATIONAL RISKS

     IF WE DO NOT SUCCESSFULLY INTEGRATE RECENTLY ACQUIRED OR NEW ASSETS INTO
OUR OPERATIONS, WE MAY INCUR SIGNIFICANT EXPENSES AND LOSSES.

     We may not be able to successfully or profitably integrate, operate,
maintain and manage our recently acquired or developed assets in a competitive
environment. Our ability to successfully integrate acquired assets into our
operations, such as Westcoast, will depend on, among other things, the adequacy
of our implementation plans and the ability to achieve desired operating
efficiencies. Successful business combinations require management and other
personnel to devote significant amounts of time to integrating the acquired
business with existing operations. These efforts may distract their attention
from day-to-day business, the development or acquisition of new properties and
other business opportunities. Unexpected

                                       S-17


costs or challenges may also arise whenever businesses with different operations
and management are combined. We will experience increased costs and losses on
our investments if we are unable to successfully integrate new assets into our
operations.

     OUR INVESTMENTS AND PROJECTS LOCATED OUTSIDE OF THE UNITED STATES EXPOSE US
TO RISKS RELATED TO LAWS OF OTHER COUNTRIES, TAXES, ECONOMIC CONDITIONS,
FLUCTUATIONS IN CURRENCY RATES, POLITICAL CONDITIONS AND POLICIES OF FOREIGN
GOVERNMENTS. THESE RISKS MAY DELAY OR REDUCE OUR REALIZATION OF VALUE FROM OUR
INTERNATIONAL PROJECTS.

     We currently own and may acquire and/or dispose of material energy-related
investments and projects outside the United States. The economic and political
conditions in certain countries where we have interests or in which we may
explore development, acquisition or investment opportunities present risks of
delays in construction and interruption of business, as well as risks of war,
expropriation, nationalization, renegotiation, trade sanctions or nullification
of existing contracts and changes in law or tax policy, that are greater than in
the United States. The uncertainty of the legal environment in certain foreign
countries in which we develop or acquire projects or make investments could make
it more difficult to obtain non-recourse project or other financing on suitable
terms, could adversely affect the ability of certain customers to honor their
obligations with respect to such projects or investments and could impair our
ability to enforce our rights under agreements relating to such projects or
investments.

     Operations in foreign countries also can present currency exchange rate and
convertibility, inflation and repatriation risk. In certain conditions under
which we develop or acquire projects, or make investments, economic and monetary
conditions and other factors could affect our ability to convert our earnings
denominated in foreign currencies. In addition, risk from fluctuations in
currency exchange rates can arise when our foreign subsidiaries expend or borrow
funds in one type of currency but receive revenue in another. In such cases, an
adverse change in exchange rates can reduce our ability to meet expenses,
including debt service obligations. Foreign currency risk can also arise when
the revenues received by our foreign subsidiaries are not in U.S. dollars. In
such cases, a strengthening of the U.S. dollar could reduce the amount of cash
and income we receive from these foreign subsidiaries. While we believe we have
hedges and contracts in place to mitigate our most significant short-term
foreign currency exchange risks, our hedges may not be sufficient or we may have
some exposures that are not hedged which could result in losses or volatility in
our revenues.

     THE LONG-TERM FINANCIAL CONDITION OF OUR U.S. AND CANADIAN NATURAL GAS
TRANSMISSION BUSINESSES ARE DEPENDENT ON THE CONTINUED AVAILABILITY OF NATURAL
GAS RESERVES.

     The development of additional natural gas reserves requires significant
capital expenditures by others for exploration and development drilling and the
installation of production, gathering, storage, transportation and other
facilities and permit natural gas to be produced and delivered to our pipeline
systems. Low prices for natural gas, regulatory limitations, or the lack of
available capital for these projects could adversely affect the development of
additional reserves and production, gathering, storage and pipeline transmission
and import and export of natural gas supplies. Additional natural gas reserves
may not be developed in commercial quantities and in sufficient amounts to fill
the capacities of our pipeline systems.

     GATHERING, PROCESSING AND TRANSPORTING ACTIVITIES INVOLVE NUMEROUS RISKS
THAT MAY RESULT IN ACCIDENTS AND OTHER OPERATING RISKS AND COSTS.

     There are inherent in our gas gathering, processing and transporting
properties a variety of hazards and operating risks, such as leaks, explosions
and mechanical problems, that could cause substantial financial losses. In
addition, these risks could result in loss of human life, significant damage to
property, environmental pollution, impairment of our operations and substantial
losses to us. In accordance with customary industry practice, we maintain
insurance against some, but not all, of these risks and losses. The occurrence
of any of these events not fully covered by insurance could have a material
adverse effect on our financial position and results of operations. The location
of pipelines near populated areas, including residential areas, commercial
business centers and industrial sites, could increase the level of damages
resulting from these risks.

                                       S-18


     WE ARE SUBJECT TO THE RISKS OF NUCLEAR GENERATION.

     Our three nuclear stations, Oconee, Catawba and McGuire subject us to the
risks of nuclear generation, which include:

     - the potential harmful effects on the environment and human health
       resulting from the operation of nuclear facilities and the storage,
       handling and disposal of radioactive materials;

     - limitations on the amounts and types of insurance commercially available
       to cover losses that might arise in connection with nuclear operations;
       and

     - uncertainties with respect to the technological and financial aspects of
       decommissioning nuclear plants at the end of their licensed lives.

The Nuclear Regulatory Commission has broad authority under federal law to
impose licensing and safety-related requirements for the operation of nuclear
generation facilities. In the event of non-compliance, the Nuclear Regulatory
Commission has the authority to impose fines or shut down a unit, or both,
depending upon its assessment of the severity of the situation, until compliance
is achieved. Revised safety requirements promulgated by the Nuclear Regulatory
Commission could necessitate substantial capital expenditures at our nuclear
plants. In addition, although we have no reason to anticipate a serious nuclear
incident, if an incident did occur, it could have a material adverse effect on
our results of operations or financial condition. Furthermore, the
non-compliance of other nuclear facilities operators with applicable regulations
or the occurrence of a serious nuclear incident at other facilities could result
in increased regulation of the industry as a whole, which could then increase
our compliance costs and impact the results of operations of our facilities.

     FIELD SERVICES ACCOUNTING ADJUSTMENTS IN 2002 COULD AFFECT OUR RESULTS OF
OPERATIONS.

     Field Services has been conducting an internal review of various balance
sheet accounts and anticipates completing this review by December 31, 2002. As
previously disclosed, this review has already resulted in Field Services booking
reserves for gas imbalances, making adjustments to gas inventories and recording
other miscellaneous charges of $13 million in the first quarter of 2002 and $34
million in the second quarter of 2002. Field Services anticipates additional
adjustments could be required prior to the end of 2002. Although the effect of
these adjustments has not yet been determined, based on the facts known today,
any such adjustments are not expected to be material to Duke Energy Corporation.
The impact to us of these adjustments would reflect our approximate 70%
ownership of Field Services.

     RECENT TERRORIST ACTIVITIES AND THE POTENTIAL FOR MILITARY AND OTHER
ACTIONS COULD ADVERSELY AFFECT OUR BUSINESS.

     On September 11, 2001, the United States was the target of terrorist
attacks of unprecedented scope. The continued threat of terrorism and the impact
of retaliatory military and other action by the United States and its allies may
lead to increased political, economic and financial market instability and
volatility in prices for natural gas which could affect the market for our gas
operations. In addition, future acts of terrorism could be directed against
companies operating in the United States. In particular, nuclear generation
facilities such as our nuclear plants could be potential targets of terrorist
activities. These developments have subjected our operations to increased risks
and, depending on their ultimate magnitude, could have a material adverse effect
on our business. In particular, we may experience increased capital or operating
costs to implement increased security for our plants, including our nuclear
power plants under the Nuclear Regulatory Commission's design basis threat
requirements, such as additional physical plant security and additional security
personnel.

     The insurance industry has also been disrupted by these events. As a
result, the availability of insurance covering risks we and our competitors
typically insure against may decrease. In addition, the insurance we are able to
obtain may have higher deductibles, higher premiums and more restrictive policy
terms.

                                       S-19


                                USE OF PROCEEDS

     Our net proceeds from the sale of shares of our common stock in this
offering are estimated to be approximately $          (approximately $
if the underwriters' over-allotment option is exercised in full) after deducting
underwriting discounts and commissions and estimated offering expenses payable
by us. We expect to use the net proceeds from the offering of common stock
primarily to make a capital contribution to Duke Capital Corporation so that
Duke Capital can repay outstanding commercial paper which originally was issued
to fund a portion of the cash consideration paid in the acquisition of
Westcoast. At September 20, 2002, Duke Capital had approximately $1.528 billion
of commercial paper outstanding which had a weighted average interest rate of
1.96% and a maturity of four months or less.

                                       S-20


                          PRICE RANGE OF COMMON STOCK

     Our common stock trades on the New York Stock Exchange, or NYSE, under the
symbol "DUK." The following table sets forth on a per share basis the high and
low intra-day prices for our common stock for the periods indicated.



                                                               COMMON STOCK
                                                                   PRICE
                                                              ---------------
                                                               HIGH     LOW
                                                              ------   ------
                                                                 
2000:
First Quarter...............................................  $28.97   $22.88
Second Quarter..............................................   31.38    25.94
Third Quarter...............................................   43.69    28.22
Fourth Quarter..............................................   45.22    39.41
2001:
First Quarter...............................................   40.40    32.12
Second Quarter..............................................   39.20    29.09
Third Quarter...............................................   42.85    34.39
Fourth Quarter..............................................   41.35    32.22
2002:
First Quarter...............................................   40.00    31.99
Second Quarter..............................................   39.60    28.50
Third Quarter (through September 24, 2002)..................   31.10    18.10


     The reported last sale price of our common stock on September 24, 2002 on
the NYSE was $19.24 per share. As of August 31, 2002, there were approximately
149,142 holders of record of our common stock.

                                   DIVIDENDS

     We have paid cash dividends on our common stock without interruption since
1926. We paid a quarterly dividend of $0.275 per share in each of 2000 and 2001
and each of the first, second and third quarters of 2002. Future dividends will
depend upon our future earnings, financial condition and other factors affecting
dividend policy.

     We have an InvestorDirect Choice Plan pursuant to which holders of our
common stock may automatically reinvest their common stock dividends in shares
of our common stock. Holders who become participants in the plan may also make
optional cash payments (not more than $100,000 per calendar year) to be invested
in shares of our common stock. For information concerning the InvestorDirect
Choice Plan, write us at Duke Energy Corporation, Investor Relations Department,
P.O. Box 1005, Charlotte, NC 28201-1005.

                                       S-21


                                 CAPITALIZATION

     The following table sets forth our capitalization as of June 30, 2002:

     - on an actual basis; and

     - on an as adjusted basis to give effect to the sale of the 52,000,000
       shares of our common stock in this offering and the application of the
       net proceeds as described under "Use of Proceeds".

     You should read the information in this table together with our
consolidated financial statements and the related notes incorporated by
reference in this prospectus supplement and accompanying prospectus.



                                                               AS OF JUNE 30, 2002
                                                              ---------------------
                                                              ACTUAL    AS ADJUSTED
                                                              -------   -----------
                                                                  (IN MILLIONS)
                                                                  
Short-term debt, including commercial paper.................  $ 2,673     $
                                                              -------     -------
Long-term debt, including current maturities:
  First and refunding mortgage bonds........................      790         790
  Other long-term debt......................................    3,665       3,665
  Long-term debt of subsidiaries............................   14,882      14,882
                                                              -------     -------
     Total long term debt...................................   19,337      19,337
                                                              -------     -------
Guaranteed preferred beneficial interests in subordinated
  notes of Duke Energy or subsidiaries......................    1,407       1,407
                                                              -------     -------
Minority interests..........................................    2,996       2,996
                                                              -------     -------
Preferred and preference stock, including current sinking
  fund obligations:
  With sinking fund requirements............................       38          38
  Without sinking fund requirements.........................      209         209
                                                              -------     -------
     Total preferred stock, including current sinking fund
      obligations...........................................      247         247
                                                              -------     -------
Common stockholders' equity:
  Common stock, no par; 2 billion shares authorized;
     832 million shares outstanding, actual and 884 million
     shares outstanding, as adjusted........................    8,184
  Retained earnings.........................................    6,553       6,553
  Accumulated other comprehensive income....................      150         150
                                                              -------     -------
     Total common stockholders' equity......................   14,887
                                                              -------     -------
          Total capitalization..............................  $41,547     $
                                                              =======     =======


                                       S-22


      CERTAIN UNITED STATES TAX CONSEQUENCES TO NON-UNITED STATES HOLDERS

     The following summary describes the material United States federal income
tax consequences of the ownership of common stock by a Non-United States Holder
(as defined below) as of the date hereof. This discussion does not address all
aspects of United States federal income and estate taxes and does not deal with
foreign, state and local tax consequences that may be relevant to such
Non-United States Holders in light of their personal circumstances. Special
rules may apply to certain Non-United States Holders, such as certain United
States expatriates, "controlled foreign corporations," "passive foreign
investment companies," "foreign personal holding companies" and corporations
that accumulate earnings to avoid United States federal income tax, that are
subject to special treatment under the Internal Revenue Code of 1986, as amended
(the "Code"). Such Non-United States Holders should consult their own tax
advisors to determine the United States federal, state, local and other tax
consequences that may be relevant to them. Furthermore, the discussion below is
based upon the provisions of the Code, and regulations, rulings and judicial
decisions thereunder as of the date hereof, and such authorities may be
repealed, revoked or modified so as to result in United States federal income
tax consequences different from those discussed below.

     If a partnership holds common stock, the tax treatment of a partner will
generally depend on the status of the partner and the activities of the
partnership. Persons who are partners of partnerships holding common stock
should consult their own tax advisors.

     As used herein, a "United States Holder" of common stock means a holder
that for United States federal income tax purposes is (i) a citizen or resident
of the United States, (ii) a corporation or partnership created or organized in
or under the laws of the United States or any political subdivision thereof,
(iii) an estate the income of which is subject to United States federal income
taxation regardless of its source or (iv) a trust if (1) it is subject to the
primary supervision of a court within the United States and one or more United
States persons have the authority to control all substantial decisions of the
trust or (2) it has a valid election in effect under applicable U.S. Treasury
regulations to be treated as a United States person. A "Non-United States
Holder" is a holder that is not a United States Holder.

     PERSONS CONSIDERING THE PURCHASE, OWNERSHIP OR DISPOSITION OF COMMON STOCK
SHOULD CONSULT THEIR OWN TAX ADVISORS CONCERNING THE UNITED STATES FEDERAL
INCOME TAX CONSEQUENCES IN LIGHT OF THEIR PARTICULAR SITUATIONS AS WELL AS ANY
CONSEQUENCES ARISING UNDER THE LAWS OF ANY OTHER TAXING JURISDICTION.

DIVIDENDS

     Dividends paid to a Non-United States Holder of common stock generally will
be subject to withholding of United States federal income tax at a 30% rate or
such lower rate as may be specified by an applicable income tax treaty. However,
dividends that are effectively connected with the conduct of a trade or business
by the Non-United States Holder within the United States, and, where a tax
treaty applies, are attributable to a United States permanent establishment of
the Non-United States Holder, are not subject to the withholding tax, but
instead are subject to United States federal income tax on a net income basis at
applicable graduated individual or corporate rates. Certain certification and
disclosure requirements must be satisfied in order for effectively connected
income to be exempt from withholding. Any such effectively connected dividends
received by a foreign corporation may be subject to an additional "branch
profits tax" at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty.

     A Non-United States Holder of common stock who wishes to claim the benefit
of an applicable treaty rate (and avoid backup withholding as discussed below)
for dividends paid will be required (a) to complete Internal Revenue Service
("IRS") Form W-8BEN (or other applicable form) and certify under penalties of
perjury that such holder is not a United States person or (b) if the common
stock is held through certain foreign intermediaries, to satisfy the relevant
certification requirements of applicable U.S. Treasury regulations. Special
certification and other requirements apply to certain Non-United States Holders
that are entities rather than individuals.

                                       S-23


     A Non-United States Holder of common stock eligible for a reduced rate of
United States withholding tax pursuant to an income tax treaty may obtain a
refund of any excess amounts withheld by filing an appropriate claim for refund
with the IRS.

GAIN ON DISPOSITION OF COMMON STOCK

     A Non-United States Holder generally will not be subject to United States
federal income tax with respect to gain recognized on a sale or other
disposition of common stock unless (i) the gain is effectively connected with a
trade or business of the Non-United States Holder in the United States, and,
where a tax treaty applies, is attributable to a United States permanent
establishment of the Non-United States Holder, (ii) in the case of a Non-United
States Holder who is an individual and holds the common stock as a capital
asset, such holder is present in the United States for 183 or more days in the
taxable year of the sale or other disposition and certain other conditions are
met, or (iii) we are or have been a "United States real property holding
corporation" for United States federal income tax purposes.

     A Non-United States Holder described in clause (i) above will be subject to
tax on the net gain derived from the sale under regular graduated United States
federal income tax rates, and, if it is a corporation, may be subject to the
branch profits tax at a 30% rate or such lower rate as may be specified by an
applicable income tax treaty. An individual Non-United States Holder described
in clause (ii) above will be subject to a flat 30% tax on the gain derived from
the sale, which tax may be offset by U.S. source capital losses (even though the
individual is not considered a resident of the United States).

     We have not determined whether we are a "United States real property
holding corporation" for United States federal income tax purposes. If we are or
become a United States real property holding corporation, so long as the common
stock continues to be regularly traded on an established securities market, only
a Non-United States Holder who actually or constructively holds or held (at any
time during the shorter of the five-year period preceding the date of
disposition or the holder's holding period) more than five percent of the common
stock will be subject to United States federal income tax on the disposition of
the common stock.

FEDERAL ESTATE TAX

     Common stock held by an individual Non-United States Holder at the time of
death will be included in such holder's gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

     We must report annually to the IRS and to each Non-United States Holder the
amount of dividends paid to such holder and the tax withheld, if any, with
respect to such dividends, regardless of whether withholding was required.
Copies of the information returns reporting such dividends and withholding may
also be made available to the tax authorities in the country in which the
Non-United States Holder resides under the provisions of an applicable income
tax treaty.

     A Non-United States Holder will be subject to backup withholding unless
applicable certification requirements are met.

     Payment of the proceeds of a sale of common stock within the United States
or conducted through certain U.S.-related financial intermediaries is subject to
both backup withholding and information reporting unless the beneficial owner
certifies under penalties of perjury that it is a Non-United States Holder (and
the payor does not have actual knowledge or reason to know that the beneficial
owner is a United States person) or the holder otherwise establishes an
exemption.

     Any amounts withheld under the backup withholding rules may be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.

                                       S-24


                                  UNDERWRITING

     Under the terms and subject to the conditions contained in an underwriting
agreement dated the date of this prospectus supplement, the underwriters named
below, for whom Morgan Stanley & Co. Incorporated is acting as representative,
have severally agreed to purchase, and we have agreed to sell to them,
severally, the number of shares of common stock indicated below:



                                                               NUMBER OF
NAME                                                            SHARES
----                                                          -----------
                                                           
Morgan Stanley & Co. Incorporated...........................
Banc of America Securities LLC..............................
Deutsche Bank Securities Inc. ..............................
Goldman, Sachs & Co. .......................................
J.P. Morgan Securities Inc. ................................
Salomon Smith Barney Inc. ..................................
Wachovia Securities, Inc. ..................................
ABN AMRO Rothschild LLC.....................................
CIBC World Markets Corp. ...................................
Credit Suisse First Boston Corporation......................
Scotia Capital (USA) Inc. ..................................
TD Securities (USA) Inc. ...................................
UBS Warburg LLC.............................................
                                                              -----------
          Total.............................................   52,000,000
                                                              ===========


     The underwriters are offering the shares of common stock subject to their
acceptance of the shares from us and subject to prior sale. The underwriting
agreement provides that the several obligations of the underwriters to pay for
and accept delivery of the shares of common stock offered by this prospectus
supplement are subject to the approval of certain legal matters by their counsel
and to other conditions. The underwriters are obligated to take and pay for all
of the shares of common stock offered by this prospectus supplement if any are
taken. However, the underwriters are not required to take or pay for the shares
of common stock covered by the underwriters' over-allotment option described
below.

     The underwriters initially propose to offer some of the shares of common
stock directly to the public at the public offering price listed on the cover
page of this prospectus supplement. The underwriters may also offer some of the
shares of common stock to securities dealers at a price that represents a
concession not in excess of $     per share. After the initial offering of the
shares of common stock, the offering price and other selling terms may from time
to time be changed by Morgan Stanley & Co. Incorporated on behalf of the
underwriters.

     We have granted to the underwriters an option to purchase from us within 30
days from the date of this prospectus supplement up to an aggregate of 7,800,000
additional shares of common stock at the public offering price listed on the
cover page of this prospectus supplement less underwriting discounts and
commissions. The underwriters may exercise this option solely to cover
over-allotments, if any, made in connection with this offering. If the option is
exercised, each underwriter will become obligated, subject to certain
conditions, to purchase approximately the same percentage of additional shares
of common stock as the number listed next to the underwriter's name in the
preceding table bears to the total number of shares of common stock offered by
all the underwriters. If the underwriters' over-allotment option is exercised in
full, the total public offering price would be approximately $     million, the
total underwriting discounts and commissions would be approximately $
million and the total proceeds to us, before offering expenses, would be
approximately $     million.

     We estimate that the total expenses of this offering payable by us,
excluding underwriting discounts and commissions, will be approximately $     .

                                       S-25


     Our common stock is listed on the New York Stock Exchange and trades under
the symbol "DUK," and the shares of common stock offered hereby have been
approved for listing subject to official notice of issuance. No underwriter is
obligated to make a market in our common stock and any market making may be
discontinued at any time without notice.

     In connection with this offering, certain of the underwriters may
distribute prospectuses electronically.

     We have agreed to indemnify the underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, and to contribute to
payments the underwriters may be required to make under the Securities Act of
1933.

     We and our executive officers have each agreed that subject to certain
exceptions, without the prior written consent of Morgan Stanley & Co.
Incorporated on behalf of the underwriters, we and our executive officers will
not, during the 60-day period after the date of this prospectus supplement:

     - offer, pledge, sell or contract to sell any shares of common stock,

     - sell any option or contract to purchase any shares of common stock,

     - purchase any option or contract to sell any shares of common stock,

     - grant any option, right or warrant for the sale of any shares of common
       stock,

     - lend or otherwise dispose of or transfer any shares of common stock, or

     - enter into any swap or other agreement that transfers, in whole or in
       part, the economic consequence of ownership of any shares of common
       stock, whether any such swap or transaction is to be settled by delivery
       of shares or other securities, in cash or otherwise.

     This lock-up provision applies to shares of common stock and to securities
convertible into or exchangeable or exercisable for or repayable with shares of
common stock. It also applies to shares of common stock owned now or acquired
later by the person executing the agreement or for which the person executing
the agreement later acquires the power of disposition. This agreement does not
apply to issuances under our employee or director compensation plans or our
employee or other investment plans. Morgan Stanley & Co. Incorporated on behalf
of the underwriters, in its sole discretion, may release any of the securities
subject to these lock-up agreements at any time without notice.

     In order to facilitate the offering of the common stock, the underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the common stock. Specifically, the underwriters may over-allot in
connection with the offering, creating a short position in the common stock for
their own account. A short sale is covered if the short position is no greater
than the number of shares of common stock available for purchase by the
underwriters under the over-allotment option. The underwriters can close out a
covered short sale by exercising the over-allotment option or purchasing common
stock in the open market. In determining the source of common stock to close out
a covered short sale, the underwriters will consider, among other things, the
open market price of the common stock compared to the price available under the
over-allotment option. The underwriters may also sell common stock in excess of
the over-allotment option, creating a naked short position. The underwriters
must close out any naked short position by purchasing common stock in the open
market. A naked short position is more likely to be created if the underwriters
are concerned that there may be downward pressure on the price of the common
stock in the open market after pricing that could adversely affect investors who
purchase shares of common stock in the offering. As an additional means of
facilitating the offering of common stock, the underwriters may bid for and
purchase any shares of common stock in the open market to stabilize the price of
the common stock. Finally, the underwriting syndicate may reclaim selling
concessions allowed to an underwriter or a dealer for distributing the shares of
common stock in the offering, if the syndicate repurchases previously
distributed shares of common stock in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common stock above independent
market levels or prevent or retard a

                                       S-26


decline in the market price of the common stock. The underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

     From time to time, some of the underwriters and their affiliates have
provided, and continue to provide, investment banking and commercial banking
services to us and our affiliates.

                                    EXPERTS

     The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus supplement by reference from Duke
Energy's Annual Report on Form 10-K for the year ended December 31, 2001 have
been audited by Deloitte & Touche LLP, as independent auditors, as stated in
their report, which is incorporated herein by reference, and have been so
incorporated in reliance upon the report of such firm given upon their authority
as experts in accounting and auditing.

                                 LEGAL MATTERS

     Certain legal matters with respect to the offering of the common stock will
be passed on for us by Edward M. Marsh, Jr., Esq., who is our Deputy General
Counsel and Assistant Secretary, and by Simpson Thacher & Bartlett, New York,
New York, and for the underwriters by Sidley Austin Brown & Wood LLP, New York,
New York. In rendering their opinions, Simpson Thacher & Bartlett and Sidley
Austin Brown & Wood LLP will rely upon Mr. Marsh as to all matters of North
Carolina law. As of September 23, 2002, Mr. Marsh owned 10,512 shares of our
common stock or common stock units and options to purchase 36,350 shares, 10,800
of which were exercisable.

                                       S-27


PROSPECTUS

                                 $2,000,000,000

                            DUKE ENERGY CORPORATION

                                  SENIOR NOTES
                           JUNIOR SUBORDINATED NOTES
                       FIRST AND REFUNDING MORTGAGE BONDS
                                  COMMON STOCK
                            STOCK PURCHASE CONTRACTS
                              STOCK PURCHASE UNITS

                             ---------------------

                         DUKE ENERGY CAPITAL TRUST III

                          DUKE ENERGY CAPITAL TRUST IV

                          DUKE ENERGY CAPITAL TRUST V

                           TRUST PREFERRED SECURITIES
                 GUARANTEED, TO THE EXTENT DESCRIBED HEREIN, BY

                            DUKE ENERGY CORPORATION

                             ---------------------

     This prospectus contains summaries of the general terms of these
securities. You will find the specific terms of these securities, and the manner
in which they are being offered, in supplements to this prospectus. You should
read this prospectus and the applicable prospectus supplement carefully before
you invest.

     The Common Stock of Duke Energy is listed on the New York Stock Exchange
under the symbol "DUK."

     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.

                   This prospectus is dated August 27, 2002.


                             ABOUT THIS PROSPECTUS

     This prospectus is part of a registration statement that Duke Energy, Duke
Energy Capital Trust III, Duke Energy Capital Trust IV and Duke Energy Capital
Trust V filed with the SEC utilizing a "shelf" registration process. Under the
shelf registration process, Duke Energy may issue Senior Notes, Junior
Subordinated Notes, First and Refunding Mortgage Bonds, Common Stock, Stock
Purchase Contracts and Stock Purchase Units and the Trusts may issue Preferred
Securities in one or more offerings up to a total dollar amount of
$2,000,000,000.

     This prospectus provides general descriptions of the securities Duke Energy
and the Trusts may offer. Each time securities are sold, a prospectus supplement
will provide specific information about the terms of that offering. The
prospectus supplement may also add, update or change information contained in
this prospectus. The registration statement filed with the SEC includes exhibits
that provide more details about the matters discussed in this prospectus. You
should read this prospectus, the related exhibits filed with the SEC and any
prospectus supplement, together with the additional information described under
the caption "Where You Can Find More Information."

                                        2


                            DUKE ENERGY CORPORATION

     Duke Energy, together with its subsidiaries, an integrated provider of
energy and energy services, offers physical delivery and management of both
electricity and natural gas throughout the United States and abroad. Duke
Energy, together with its subsidiaries, provides these and other services
through seven business segments:

     o Franchised Electric

     o Natural Gas Transmission

     o Field Services

     o North American Wholesale Energy

     o International Energy

     o Other Energy Services

     o Duke Ventures

     Franchised Electric generates, transmits, distributes and sells electricity
in central and western North Carolina and western South Carolina. It conducts
operations primarily through Duke Power and Nantahala Power and Light. These
electric operations are subject to the rules and regulations of the Federal
Energy Regulatory Commission ("FERC"), the North Carolina Utilities Commission
and the Public Service Commission of South Carolina.

     Natural Gas Transmission provides transportation, storage and distribution
of natural gas for customers throughout the east coast and southern portion of
the United States and Canada. Natural Gas Transmission provides gas gathering,
processing and transportation services to customers located in British Columbia,
Canada and in the Pacific northwest region of the United States. Natural Gas
Transmission does business primarily through Duke Energy Gas Transmission
Corporation. Duke Energy acquired Westcoast Energy, Inc. on March 14, 2002.
Interstate natural gas transmission and storage operations in the United States
are subject to the FERC's rules and regulations while natural gas gathering,
processing, transmission, distribution and storage operations in Canada are
subject to the rules and regulations of the National Energy Board, the Ontario
Energy Board and the British Columbia Utilities Commission.

     Field Services gathers, processes, transports, markets and stores natural
gas and produces, transports, markets and stores natural gas liquids. It
conducts operations primarily through Duke Energy Field Services, LLC, which is
approximately 30% owned by Phillips Petroleum. Field Services operates gathering
systems in western Canada and 11 contiguous states in the United States. Those
systems serve major natural gas-producing regions in the Rocky Mountains,
Permian Basin, Mid-Continent, East Texas-Austin Chalk-North Louisiana, and
onshore and offshore Gulf Coast areas.

     Duke Energy North America develops, operates and manages merchant
generation facilities and engages in commodity sales and services related to
natural gas and electric power. Duke Energy North America conducts business
throughout the United States and Canada through Duke Energy North America, LLC
and Duke Energy Trading and Marketing, LLC. Duke Energy Trading and Marketing is
approximately 40% owned by Exxon Mobil Corporation. Prior to April 1, 2002, the
Duke Energy North America business segment was combined with Duke Energy
Merchants Holdings, LLC to form a segment called North American Wholesale
Energy. As of June 30, 2002, management combined Duke Energy Merchants Holdings
with the Other Energy Services segment. Management separated Duke Energy North
America for increased reporting transparency. Previous periods have been
reclassified to conform to the current presentation. As of August 1, 2002, Duke
Energy's North American trading and marketing functions currently in Duke Energy
North America and Duke Energy Merchants Holdings, including Duke Energy Trading
and Marketing and the Canadian trading operations, were consolidated into one
group.

     International Energy develops, operates and manages natural gas
transportation and power generation facilities and engages in energy trading and
marketing of natural gas and electric power. It conducts

                                        3


operations primarily through Duke Energy International, LLC and its activities
target the Latin American, Asia-Pacific and European regions.

     Other Energy Services is composed of diverse energy businesses, operating
primarily through Duke Energy Merchants Holdings, Duke/Fluor Daniel and Energy
Delivery Services. Duke Energy Merchants Holdings engages in commodity buying
and selling, and risk management and financial services in the energy commodity
markets other than natural gas and power (such as refined products, liquefied
petroleum gas, residual fuels, crude oil and coal).

     Duke/Fluor Daniel provides comprehensive engineering, procurement,
construction, commissioning and operating plant services for fossil-fueled
electric power generating facilities worldwide. It is a 50/50 partnership
between Duke Energy and Fluor Enterprises, Inc., a wholly owned subsidiary of
Fluor Corporation. Energy Delivery Services is an engineering, construction,
maintenance and technical services firm specializing in electric transmission
and distribution lines and substation projects. It was formed in the second
quarter of 2002 from the power delivery services component of Duke Engineering &
Services, Inc. This segment was excluded from the sale of Duke Engineering &
Services on April 30, 2002. Other Energy Services also retained the portion of
DukeSolutions, Inc. that was not sold on May 1, 2002. Duke Engineering &
Services and DukeSolutions were included in Other Energy Services through the
date of their sale.

     Duke Ventures is composed of other diverse businesses, operating primarily
through Crescent Resources, LLC, DukeNet Communications, LLC and Duke Capital
Partners, LLC. Crescent Resources develops high-quality commercial, residential
and multi-family real estate projects and manages land holdings primarily in the
southeastern and southwestern United States. DukeNet Communications develops and
manages fiber optic communications systems for wireless, local and long distance
communications companies and selected educational, governmental, financial and
health care entities. Duke Capital Partners, a wholly owned merchant banking
company, provides debt and equity capital and financial advisory services
primarily to the energy industry.

     The foregoing information about Duke Energy and its business segments is
only a general summary and is not intended to be comprehensive. For additional
information about Duke Energy and its business segments, you should refer to the
information described under the caption "Where You Can Find More Information."

     Duke Energy is a North Carolina corporation. Its principal executive
offices are located at 526 South Church Street, Charlotte, North Carolina 28202
(telephone (704) 594-6200).

                       RATIO OF EARNINGS TO FIXED CHARGES
                                  (UNAUDITED)



                                              YEAR ENDED DECEMBER 31,           SIX MONTHS
                                        -----------------------------------   ENDED JUNE 30,
                                        1997(1)   1998   1999   2000   2001        2002
                                        -------   ----   ----   ----   ----   --------------
                                                            
Ratio of Earnings to Fixed Charges....    4.0     4.5    2.7    3.6    3.8         2.7


     For purposes of this ratio (a) earnings consist of income from continuing
operations before income taxes and fixed charges, and (b) fixed charges consist
of all interest deductions, the interest component of rentals and preference
security dividends of consolidated subsidiaries.
---------------

(1) Data reflects accounting for the stock-for-stock merger of Duke Energy and
    PanEnergy Corp on June 18, 1997 as a pooling of interests. As a result, the
    data gives effect to the merger as if it had occurred as of January 1, 1997.

                                        4


                                USE OF PROCEEDS

     Unless Duke Energy states otherwise in the accompanying prospectus
supplement, Duke Energy intends to use the net proceeds from the sale of any
offered securities:

     o to redeem or purchase from time to time presently outstanding securities
       when it anticipates those transactions will result in an overall cost
       savings;

     o to repay maturing securities;

     o to finance its ongoing construction program; or

     o for general corporate purposes.

     The proceeds from the sale of Preferred Securities by a Trust will be
invested in Junior Subordinated Notes issued by Duke Energy. Except as Duke
Energy may otherwise describe in the related prospectus supplement, Duke Energy
expects to use the net proceeds from the sale of such Junior Subordinated Notes
to the applicable Trust for the above purposes.

                              RECENT DEVELOPMENTS

     Duke Energy adopted SFAS No. 142, "Goodwill and Other Intangible Assets,"
as of January 1, 2002. SFAS No. 142 requires that goodwill no longer be
amortized over an estimated useful life, as previously required. Instead,
goodwill amounts are subject to a fair-value-based annual impairment assessment.
Duke Energy did not recognize any material impairment due to the implementation
of SFAS No. 142. The standard also requires certain identifiable intangible
assets to be recognized separately and amortized as appropriate upon
reassessment. No adjustments to intangibles were identified by Duke Energy at
transition.

     The following table shows what net income and earnings per share would have
been if amortization (including any related tax effects) related to goodwill
that is no longer being amortized had been excluded from prior periods.



                                                                       

                                                                    FOR THE YEAR ENDED
                                                              ------------------------------
                                                                2001       2000       1999
                                                              --------   --------   --------
                                                              (IN MILLIONS, EXCEPT PER SHARE
                                                                         AMOUNTS)
                                                                           
Income Before Extraordinary Item and Cumulative Effect of
  Change in Accounting Principle............................   $1,994     $1,776     $  847
Extraordinary Gain, net of tax..............................       --         --        660
Cumulative Effect of Change in Accounting Principle, net of
  tax.......................................................      (96)        --         --
                                                               ------     ------     ------
  Reported net income.......................................    1,898      1,776      1,507
  Add back: Goodwill amortization, net of tax...............       75         56         39
                                                               ------     ------     ------
  Adjusted net income.......................................   $1,973     $1,832     $1,546
                                                               ======     ======     ======
BASIC EARNINGS PER SHARE (BEFORE EXTRAORDINARY ITEM AND
  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE)
  Reported earnings per share...............................   $ 2.58     $ 2.39     $ 1.13
  Goodwill amortization.....................................     0.10       0.07       0.05
                                                               ------     ------     ------
  Adjusted earnings per share...............................   $ 2.68     $ 2.46     $ 1.18
                                                               ------     ------     ------
DILUTED EARNINGS PER SHARE (BEFORE EXTRAORDINARY ITEM AND
  CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE)
  Reported earnings per share...............................   $ 2.56     $ 2.38     $ 1.13
  Goodwill amortization.....................................     0.10       0.07       0.05
                                                               ------     ------     ------
  Adjusted earnings per share...............................   $ 2.66     $ 2.45     $ 1.18
                                                               ------     ------     ------


                                        5




                                                                    FOR THE YEAR ENDED
                                                              ------------------------------
                                                                2001       2000       1999
                                                              --------   --------   --------
                                                              (IN MILLIONS, EXCEPT PER SHARE
                                                                         AMOUNTS)
                                                                           
BASIC EARNINGS PER SHARE
  Reported earnings per share...............................   $ 2.45     $ 2.39     $ 2.04
  Goodwill amortization.....................................     0.10       0.07       0.05
                                                               ------     ------     ------
  Adjusted earnings per share...............................   $ 2.55     $ 2.46     $ 2.09
                                                               ------     ------     ------
DILUTED EARNINGS PER SHARE
  Reported earnings per share...............................   $ 2.44     $ 2.38     $ 2.03
  Goodwill amortization.....................................     0.10       0.07       0.05
                                                               ------     ------     ------
  Adjusted earnings per share...............................   $ 2.54     $ 2.45     $ 2.08
                                                               ------     ------     ------


                                   THE TRUSTS

     Duke Energy formed each Trust as a statutory business trust under Delaware
law. Each Trust's business is defined in a trust agreement executed by Duke
Energy, as depositor, and Chase Manhattan Bank USA, National Association
(formerly known as Chase Manhattan Bank Delaware). Each trust agreement will be
amended when Preferred Securities are issued under it and will be in
substantially the form filed as an exhibit to the registration statement, of
which this prospectus is a part. An amended trust agreement is called a "Trust
Agreement" in this prospectus.

     The Preferred Securities and the Common Securities of each Trust represent
undivided beneficial interests in the assets of that Trust. The Preferred
Securities and the Common Securities together are sometimes called the "Trust
Securities" in this prospectus.

     The trustees of each Trust will conduct that Trust's business and affairs.
Duke Energy, as the holder of the Common Securities of each Trust, will appoint
the trustees of that Trust. The trustees of each Trust will consist of:

     o two officers of Duke Energy as Administrative Trustees;

     o The JPMorgan Chase Bank as Property Trustee; and

     o Chase Manhattan Bank USA, National Association as Delaware Trustee.

     The prospectus supplement relating to the Preferred Securities of a Trust
will provide further information concerning that Trust.

     No separate financial statements of any Trust are included in this
prospectus. Duke Energy considers that such statements would not be material to
holders of the Preferred Securities because no Trust has any independent
operations and the sole purpose of each Trust is investing the proceeds of the
sale of its Trust Securities in Junior Subordinated Notes. Duke Energy does not
expect that any of the Trusts will be filing annual, quarterly or special
reports with the SEC.

     The principal place of business of each Trust will be c/o Duke Energy
Corporation, 526 South Church Street, Charlotte, North Carolina 28202, telephone
(704) 594-6200.

ACCOUNTING TREATMENT

     Each Trust will be treated as a subsidiary of Duke Energy for financial
reporting purposes. Accordingly, Duke Energy's consolidated financial statements
will include the accounts of each Trust. The Preferred Securities, along with
other trust preferred securities that Duke Energy guarantees on an equivalent
basis, will be presented as a separate line item in Duke Energy's consolidated
balance sheets, entitled "Guaranteed Preferred Beneficial Interests in
Subordinated Notes of Duke Energy Corporation or

                                        6


Subsidiaries." Duke Energy will record distributions that each Trust pays on the
Preferred Securities as an expense in its consolidated statement of income.

                        DESCRIPTION OF THE SENIOR NOTES

     Duke Energy will issue the Senior Notes in one or more series under its
Senior Indenture dated as of September 1, 1998 between Duke Energy and JPMorgan
Chase Bank (formerly known as The Chase Manhattan Bank), as Trustee, as
supplemented from time to time. The Senior Indenture is an exhibit to the
registration statement, of which this prospectus is a part.

     The Senior Notes are unsecured and unsubordinated obligations and will rank
equally with all of Duke Energy's other unsecured and unsubordinated
indebtedness. The First and Refunding Mortgage Bonds are effectively senior to
the Senior Notes to the extent of the value of the properties securing them. As
of June 30, 2002, there were approximately $790,000,000 in aggregate principal
amount of First and Refunding Mortgage Bonds outstanding.

     Duke Energy conducts its non-electric operations, and certain of its
electric operations outside its service area in the Carolinas, through
subsidiaries. Accordingly, its ability to meet its obligations under the Senior
Notes is partly dependent on the earnings and cash flows of those subsidiaries
and the ability of those subsidiaries to pay dividends or to advance or repay
funds to Duke Energy. In addition, the rights that Duke Energy and its creditors
would have to participate in the assets of any such subsidiary upon the
subsidiary's liquidation or recapitalization will be subject to the prior claims
of the subsidiary's creditors. Certain of Duke Energy's subsidiaries have
incurred substantial amounts of debt in the expansion of their businesses, and
Duke Energy anticipates that certain of its subsidiaries will do so in the
future.

     The following description of the Senior Notes is only a summary and is not
intended to be comprehensive. For additional information you should refer to the
Senior Indenture.

General

     The Senior Indenture does not limit the amount of Senior Notes that Duke
Energy may issue under it. Duke Energy may issue Senior Notes from time to time
under the Senior Indenture in one or more series by entering into supplemental
indentures or by its Board of Directors or a duly authorized committee
authorizing the issuance. The form of supplemental indenture to the Senior
Indenture is an exhibit to the registration statement, of which this prospectus
is a part.

     The Senior Notes of a series need not be issued at the same time, bear
interest at the same rate or mature on the same date.

     The Senior Indenture does not protect the holders of Senior Notes if Duke
Energy engages in a highly leveraged transaction.

Provisions Applicable to Particular Series

     The prospectus supplement for a particular series of Senior Notes being
offered will disclose the specific terms related to the offering, including the
price or prices at which the Senior Notes to be offered will be issued. Those
terms may include some or all of the following:

     o the title of the series;

     o the total principal amount of the Senior Notes of the series;

     o the date or dates on which principal is payable or the method for
       determining the date or dates, and any right that Duke Energy has to
       change the date on which principal is payable;

     o the interest rate or rates, if any, or the method for determining the
       rate or rates, and the date or dates from which interest will accrue;

                                        7


     o any interest payment dates and the regular record date for the interest
       payable on each interest payment date, if any;

     o whether Duke Energy may extend the interest payment periods and, if so,
       the terms of the extension;

     o the place or places where payments will be made;

     o whether Duke Energy has the option to redeem the Senior Notes and, if so,
       the terms of its redemption option;

     o any obligation that Duke Energy has to redeem the Senior Notes through a
       sinking fund or to purchase the Senior Notes through a purchase fund or
       at the option of the holder;

     o whether the provisions described under "Defeasance and Covenant
       Defeasance" will not apply to the Senior Notes;

     o the currency in which payments will be made if other than U.S. dollars,
       and the manner of determining the equivalent of those amounts in U.S.
       dollars;

     o if payments may be made, at Duke Energy's election or at the holder's
       election, in a currency other than that in which the Senior Notes are
       stated to be payable, then the currency in which those payments may be
       made, the terms and conditions of the election and the manner of
       determining those amounts;

     o the portion of the principal payable upon acceleration of maturity, if
       other than the entire principal;

     o whether the Senior Notes will be issuable as global securities and, if
       so, the securities depositary;

     o any changes in the events of default or covenants with respect to the
       Senior Notes;

     o any index or formula used for determining principal, premium or interest;

     o if the principal payable on the maturity date will not be determinable on
       one or more dates prior to the maturity date, the amount which will be
       deemed to be such principal amount or the manner of determining it; and

     o any other terms.

     Unless Duke Energy states otherwise in the applicable prospectus
supplement, Duke Energy will issue the Senior Notes only in fully registered
form without coupons, and there will be no service charge for any registration
of transfer or exchange of the Senior Notes. Duke Energy may, however, require
payment to cover any tax or other governmental charge payable in connection with
any transfer or exchange. Subject to the terms of the Senior Indenture and the
limitations applicable to global securities, transfers and exchanges of the
Senior Notes may be made at JPMorgan Chase Bank, 450 West 33rd Street, New York,
New York 10001 or at any other office or agency maintained by Duke Energy for
such purpose.

     The Senior Notes will be issuable in denominations of $1,000 and any
integral multiples of $1,000, unless Duke Energy states otherwise in the
applicable prospectus supplement.

     Duke Energy may offer and sell the Senior Notes, including original issue
discount Senior Notes, at a substantial discount below their principal amount.
The applicable prospectus supplement will describe special United States federal
income tax and any other considerations applicable to those securities. In
addition, the applicable prospectus supplement may describe certain special
United States federal income tax or other considerations, if any, applicable to
any Senior Notes that are denominated in a currency other than U.S. dollars.

                                        8


Global Securities

     Duke Energy may issue some or all of the Senior Notes as book-entry
securities. Any such book-entry securities will be represented by one or more
fully registered global securities. Duke Energy will register each global
security with or on behalf of a securities depositary identified in the
applicable prospectus supplement. Each global security will be deposited with
the securities depositary or its nominee or a custodian for the securities
depositary.

     As long as the securities depositary or its nominee is the registered
holder of a global security representing Senior Notes, that person will be
considered the sole owner and holder of the global security and the Senior Notes
it represents for all purposes. Except in limited circumstances, owners of
beneficial interests in a global security:

     o may not have the global security or any Senior Notes it represents
       registered in their names;

     o may not receive or be entitled to receive physical delivery of
       certificated Senior Notes in exchange for the global security; and

     o will not be considered the owners or holders of the global security or
       any Senior Notes it represents for any purposes under the Senior Notes or
       the Senior Indenture.

     Duke Energy will make all payments of principal and any premium and
interest on a global security to the securities depositary or its nominee as the
holder of the global security. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of securities in
definitive form. These laws may impair the ability to transfer beneficial
interests in a global security.

     Ownership of beneficial interests in a global security will be limited to
institutions having accounts with the securities depositary or its nominee,
which are called "participants" in this discussion, and to persons that hold
beneficial interests through participants. When a global security representing
Senior Notes is issued, the securities depositary will credit on its book entry,
registration and transfer system the principal amounts of Senior Notes the
global security represents to the accounts of its participants. Ownership of
beneficial interests in a global security will be shown only on, and the
transfer of those ownership interests will be effected only through, records
maintained by:

     o the securities depositary, with respect to participants' interests; and

     o any participant, with respect to interests the participant holds on
       behalf of other persons.

     Payments participants make to owners of beneficial interests held through
those participants will be the responsibility of those participants. The
securities depositary may from time to time adopt various policies and
procedures governing payments, transfers, exchanges and other matters relating
to beneficial interests in a global security. None of the following will have
any responsibility or liability for any aspect of the securities depositary's or
any participant's records relating to beneficial interests in a global security
representing Senior Notes, for payments made on account of those beneficial
interests or for maintaining, supervising or reviewing any records relating to
those beneficial interests:

     o Duke Energy;

     o the Senior Indenture Trustee; or

     o an agent of either of them.

Redemption

     Provisions relating to the redemption of Senior Notes will be set forth in
the applicable prospectus supplement. Unless Duke Energy states otherwise in the
applicable prospectus supplement, Duke Energy may redeem Senior Notes only upon
notice mailed at least 30 but not more than 60 days before the date fixed for
redemption. Unless Duke Energy states otherwise in the applicable prospectus
supplement, that notice may state that the redemption will be conditional upon
the Senior Indenture Trustee, or the applicable paying agent, receiving
sufficient funds to pay the principal, premium and interest on those
                                        9


Senior Notes on the date fixed for redemption and that if the Senior Indenture
Trustee or the applicable paying agent does not receive those funds, the
redemption notice will not apply, and Duke Energy will not be required to redeem
those Senior Notes.

     Duke Energy will not be required to:

     o issue, register the transfer of, or exchange any Senior Notes of a series
       during the period beginning 15 days before the date the notice is mailed
       identifying the Senior Notes of that series that have been selected for
       redemption; or

     o register the transfer of or exchange any Senior Note of that series
       selected for redemption except the unredeemed portion of a Senior Note
       being partially redeemed.

Consolidation, Merger, Conveyance or Transfer

     The Senior Indenture provides that Duke Energy may consolidate or merge
with or into, or convey or transfer all or substantially all of its properties
and assets to, another corporation or other entity. Any successor must, however,
assume Duke Energy's obligations under the Senior Indenture and the Senior Notes
issued under it, and Duke Energy must deliver to the Senior Indenture Trustee a
statement by certain of its officers and an opinion of counsel that affirm
compliance with all conditions in the Senior Indenture relating to the
transaction. When those conditions are satisfied, the successor will succeed to
and be substituted for Duke Energy under the Senior Indenture, and Duke Energy
will be relieved of its obligations under the Senior Indenture and the Senior
Notes.

Modification; Waiver

     Duke Energy may modify the Senior Indenture with the consent of the holders
of a majority in principal amount of the outstanding Senior Notes of all series
of Senior Notes that are affected by the modification, voting as one class. The
consent of the holder of each outstanding Senior Note affected is, however,
required to:

     o change the maturity date of the principal or any installment of principal
       or interest on that Senior Note;

     o reduce the principal amount, the interest rate or any premium payable
       upon redemption on that Senior Note;

     o reduce the amount of principal due and payable upon acceleration of
       maturity;

     o change the currency of payment of principal, premium or interest on that
       Senior Note;

     o impair the right to institute suit to enforce any such payment on or
       after the maturity date or redemption date;

     o reduce the percentage in principal amount of Senior Notes of any series
       required to modify the Senior Indenture, waive compliance with certain
       restrictive provisions of the Senior Indenture or waive certain defaults;
       or

     o with certain exceptions, modify the provisions of the Senior Indenture
       governing modifications of the Senior Indenture or governing waiver of
       covenants or past defaults.

In addition, Duke Energy may modify the Senior Indenture for certain other
purposes, without the consent of any holders of Senior Notes.

     The holders of a majority in principal amount of the outstanding Senior
Notes of any series may waive, for that series, Duke Energy's compliance with
certain restrictive provisions of the Senior Indenture, including the covenant
described under "Negative Pledge." The holders of a majority in principal amount
of the outstanding Senior Notes of all series under the Senior Indenture with
respect to which a default has occurred and is continuing, voting as one class,
may waive that default for all those series, except a default in the payment of
principal or any premium or interest on any Senior Note or a default with
                                        10


respect to a covenant or provision which cannot be modified without the consent
of the holder of each outstanding Senior Note of the series affected.

Events of Default

     The following are events of default under the Senior Indenture with respect
to any series of Senior Notes, unless Duke Energy states otherwise in the
applicable prospectus supplement:

     o failure to pay principal of or any premium on any Senior Note of that
       series when due;

     o failure to pay when due any interest on any Senior Note of that series
       that continues for 60 days; for this purpose, the date on which interest
       is due is the date on which Duke Energy is required to make payment
       following any deferral of interest payments by it under the terms of
       Senior Notes that permit such deferrals;

     o failure to make any sinking fund payment when required for any Senior
       Note of that series that continues for 60 days;

     o failure to perform any covenant in the Senior Indenture (other than a
       covenant expressly included solely for the benefit of other series) that
       continues for 90 days after the Senior Indenture Trustee or the holders
       of at least 33% of the outstanding Senior Notes of that series give Duke
       Energy written notice of the default; and

     o certain bankruptcy, insolvency or reorganization events with respect to
       Duke Energy.

In the case of the fourth event of default listed above, the Senior Indenture
Trustee may extend the grace period. In addition, if holders of a particular
series have given a notice of default, then holders of at least the same
percentage of Senior Notes of that series, together with the Senior Indenture
Trustee, may also extend the grace period. The grace period will be
automatically extended if Duke Energy has initiated and is diligently pursuing
corrective action.

     Duke Energy may establish additional events of default for a particular
series and, if established, any such events of default will be described in the
applicable prospectus supplement.

     If an event of default with respect to Senior Notes of a series occurs and
is continuing, then the Senior Indenture Trustee or the holders of at least 33%
in principal amount of the outstanding Senior Notes of that series may declare
the principal amount of all Senior Notes of that series to be immediately due
and payable. However, that event of default will be considered waived at any
time after the declaration but before a judgment for payment of the money due
has been obtained if:

     o Duke Energy has paid or deposited with the Senior Indenture Trustee all
       overdue interest, the principal and any premium due otherwise than by the
       declaration and any interest on such amounts, and any interest on overdue
       interest, to the extent legally permitted, in each case with respect to
       that series, and all amounts due to the Senior Indenture Trustee; and

     o all events of default with respect to that series, other than the
       nonpayment of the principal that became due solely by virtue of the
       declaration, have been cured or waived.

     The Senior Indenture Trustee is under no obligation to exercise any of its
rights or powers at the request or direction of any holders of Senior Notes
unless those holders have offered the Senior Indenture Trustee security or
indemnity against the costs, expenses and liabilities which it might incur as a
result. The holders of a majority in principal amount of the outstanding Senior
Notes of any series have, with certain exceptions, the right to direct the time,
method and place of conducting any proceedings for any remedy available to the
Senior Indenture Trustee or the exercise of any power of the Senior Indenture
Trustee with respect to those Senior Notes. The Senior Indenture Trustee may
withhold notice of any default, except a default in the payment of principal or
interest, from the holders of any series if the Senior Indenture Trustee in good
faith considers it in the interest of the holders to do so.

                                        11


     The holder of any Senior Note will have an absolute and unconditional right
to receive payment of the principal, any premium and, within certain
limitations, any interest on that Senior Note on its maturity date or redemption
date and to enforce those payments.

     Duke Energy is required to furnish each year to the Senior Indenture
Trustee a statement by certain of its officers to the effect that it is not in
default under the Senior Indenture or, if there has been a default, specifying
the default and its status.

Payments; Paying Agent

     The paying agent will pay the principal of any Senior Notes only if those
Senior Notes are surrendered to it. The paying agent will pay interest on Senior
Notes issued as global securities by wire transfer to the holder of those global
securities. Unless Duke Energy states otherwise in the applicable prospectus
supplement, the paying agent will pay interest on Senior Notes that are not in
global form at its office or, at Duke Energy's option:

     o by wire transfer to an account at a banking institution in the United
       States that is designated in writing to the Senior Indenture Trustee at
       least 16 days prior to the date of payment by the person entitled to that
       interest; or

     o by check mailed to the address of the person entitled to that interest as
       that address appears in the security register for those Senior Notes.

     Unless Duke Energy states otherwise in the applicable prospectus
supplement, the Senior Indenture Trustee will act as paying agent for that
series of Senior Notes, and the principal corporate trust office of the Senior
Indenture Trustee will be the office through which the paying agent acts. Duke
Energy may, however, change or add paying agents or approve a change in the
office through which a paying agent acts.

     Any money that Duke Energy has paid to a paying agent for principal or
interest on any Senior Notes which remains unclaimed at the end of two years
after that principal or interest has become due will be repaid to Duke Energy at
its request. After repayment to Duke Energy, holders should look only to Duke
Energy for those payments.

Negative Pledge

     While any of the Senior Notes remain outstanding, Duke Energy will not
create, or permit to be created or to exist, any mortgage, lien, pledge,
security interest or other encumbrance upon any of its property, whether owned
on or acquired after the date of the Senior Indenture, to secure any
indebtedness for borrowed money of Duke Energy, unless the Senior Notes then
outstanding are equally and ratably secured for so long as any such indebtedness
is so secured.

     The foregoing restriction does not apply with respect to, among other
things:

     o purchase money mortgages, or other purchase money liens, pledges,
       security interests or encumbrances upon property that Duke Energy
       acquired after the date of the Senior Indenture;

     o mortgages, liens, pledges, security interests or other encumbrances
       existing on any property at the time Duke Energy acquired it, including
       those which exist on any property of an entity with which Duke Energy is
       consolidated or merged or which transfers or leases all or substantially
       all of its properties to Duke Energy;

     o mortgages, liens, pledges, security interests or other encumbrances upon
       any property of Duke Energy that existed on the date of the initial
       issuance of the Senior Notes;

     o pledges or deposits to secure performance in connection with bids,
       tenders, contracts (other than contracts for the payment of money) or
       leases to which Duke Energy is a party;

     o liens created by or resulting from any litigation or proceeding which at
       the time is being contested in good faith by appropriate proceedings;

                                        12


     o liens incurred in connection with the issuance of bankers' acceptances
       and lines of credit, bankers' liens or rights of offset and any security
       given in the ordinary course of business to banks or others to secure any
       indebtedness payable on demand or maturing within 12 months of the date
       that such indebtedness is originally incurred;

     o liens incurred in connection with repurchase, swap or other similar
       agreements (including commodity price, currency exchange and interest
       rate protection agreements);

     o liens securing industrial revenue or pollution control bonds;

     o liens, pledges, security interests or other encumbrances on any property
       arising in connection with any defeasance, covenant defeasance or
       in-substance defeasance of indebtedness of Duke Energy;

     o liens created in connection with, and created to secure, a non-recourse
       obligation;

     o Bonds issued or to be issued from time to time under Duke Energy's First
       and Refunding Mortgage, and the "permitted liens" specified in Duke
       Energy's First and Refunding Mortgage;

     o indebtedness which Duke Energy may issue in connection with its
       consolidation or merger with or into any other entity, which may be its
       affiliate, in exchange for or otherwise in substitution for secured
       indebtedness of that entity ("Third Party Debt") which by its terms (1)
       is secured by a mortgage on all or a portion of the property of that
       entity, (2) prohibits that entity from incurring secured indebtedness,
       unless the Third Party Debt is secured equally and ratably with such
       secured indebtedness or (3) prohibits that entity from incurring secured
       indebtedness;

     o indebtedness of any entity which Duke Energy is required to assume in
       connection with a consolidation or merger of that entity, with respect to
       which any property of Duke Energy is subjected to a mortgage, lien,
       pledge, security interest or other encumbrance;

     o mortgages, liens, pledges, security interests or other encumbrances upon
       any property that Duke Energy acquired, constructed, developed or
       improved after the date of the Senior Indenture which are created before,
       at the time of, or within 18 months after such acquisition -- or in the
       case of property constructed, developed or improved, after the completion
       of the construction, development or improvement and commencement of full
       commercial operation of that property, whichever is later -- to secure or
       provide for the payment of any part of its purchase price or cost;
       provided that, in the case of such construction, development or
       improvement, the mortgages, liens, pledges, security interests or other
       encumbrances shall not apply to any property that Duke Energy owns other
       than real property that is unimproved up to that time; and

     o the replacement, extension or renewal of any mortgage, lien, pledge,
       security interest or other encumbrance described above; or the
       replacement, extension or renewal (not exceeding the principal amount of
       indebtedness so secured together with any premium, interest, fee or
       expense payable in connection with any such replacement, extension or
       renewal) of the indebtedness so secured; provided that such replacement,
       extension or renewal is limited to all or a part of the same property
       that secured the mortgage, lien, pledge, security interest or other
       encumbrance replaced, extended or renewed, plus improvements on it or
       additions or accessions to it.

In addition, Duke Energy may create or assume any other mortgage, lien, pledge,
security interest or other encumbrance not excepted in the Senior Indenture
without Duke Energy equally and ratably securing the Senior Notes, if
immediately after that creation or assumption, the principal amount of
indebtedness for borrowed money of Duke Energy that all such other mortgages,
liens, pledges, security interests and other encumbrances secure does not exceed
an amount equal to 10% of Duke Energy's common stockholders' equity as shown on
its consolidated balance sheet for the accounting period occurring immediately
before the creation or assumption of that mortgage, lien, pledge, security
interest or other encumbrance.

                                        13


Defeasance and Covenant Defeasance

     The Senior Indenture provides that Duke Energy may be:

     o discharged from its obligations, with certain limited exceptions, with
       respect to any series of Senior Notes, as described in the Senior
       Indenture, such a discharge being called a "defeasance" in this
       prospectus; and

     o released from its obligations under certain restrictive covenants
       especially established with respect to any series of Senior Notes,
       including the covenant described under "Negative Pledge," as described in
       the Senior Indenture, such a release being called a "covenant defeasance"
       in this prospectus.

Duke Energy must satisfy certain conditions to effect a defeasance or covenant
defeasance. Those conditions include the irrevocable deposit with the Senior
Indenture Trustee, in trust, of money or government obligations which through
their scheduled payments of principal and interest would provide sufficient
money to pay the principal and any premium and interest on those Senior Notes on
the maturity dates of those payments or upon redemption.

     Following a defeasance, payment of the Senior Notes defeased may not be
accelerated because of an event of default under the Senior Indenture. Following
a covenant defeasance, the payment of Senior Notes may not be accelerated by
reference to the covenants from which Duke Energy has been released. A
defeasance may occur after a covenant defeasance.

     Under current United States federal income tax laws, a defeasance would be
treated as an exchange of the relevant Senior Notes in which holders of those
Senior Notes might recognize gain or loss. In addition, the amount, timing and
character of amounts that holders would thereafter be required to include in
income might be different from that which would be includible in the absence of
that defeasance. Duke Energy urges investors to consult their own tax advisors
as to the specific consequences of a defeasance, including the applicability and
effect of tax laws other than United States federal income tax laws.

     Under current United States federal income tax law, unless accompanied by
other changes in the terms of the Senior Notes, a covenant defeasance should not
be treated as a taxable exchange.

Concerning the Senior Indenture Trustee

     JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the
Senior Indenture Trustee and is also the trustee under Duke Energy's
Subordinated Indenture and the trustee under Duke Energy's First and Refunding
Mortgage. Duke Energy and certain of its affiliates maintain deposit accounts
and banking relationships with JPMorgan Chase Bank. JPMorgan Chase Bank also
serves as trustee or agent under other indentures and agreements pursuant to
which securities of Duke Energy and of certain of its affiliates are
outstanding.

     The Senior Indenture Trustee will perform only those duties that are
specifically set forth in the Senior Indenture unless an event of default under
the Senior Indenture occurs and is continuing. In case an event of default
occurs and is continuing, the Senior Indenture Trustee will exercise the same
degree of care as a prudent individual would exercise in the conduct of his or
her own affairs.

                  DESCRIPTION OF THE JUNIOR SUBORDINATED NOTES

     Duke Energy will issue the Junior Subordinated Notes in one or more series
under its Subordinated Indenture dated as of December 1, 1997 between Duke
Energy and JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as
Trustee, as supplemented from time to time. The Subordinated Indenture is an
exhibit to the registration statement, of which this prospectus is a part.

     The Junior Subordinated Notes are unsecured obligations of Duke Energy and
are junior in right of payment to "Senior Indebtedness" of Duke Energy. You will
find a description of the subordination provisions of the Junior Subordinated
Notes, including a description of Senior Indebtedness of Duke Energy, under
"Subordination."
                                        14


     Duke Energy conducts its non-electric operations, and certain of its
electric operations outside its service area in the Carolinas, through
subsidiaries. Accordingly, its ability to meet its obligations under the Junior
Subordinated Notes is partly dependent on the earnings and cash flows of those
subsidiaries and the ability of those subsidiaries to pay dividends or to
advance or repay funds to Duke Energy. In addition, the rights that Duke Energy
and its creditors would have to participate in the assets of any such subsidiary
upon the subsidiary's liquidation or recapitalization will be subject to the
prior claims of the subsidiary's creditors. Certain of Duke Energy's
subsidiaries have incurred substantial amounts of debt in the expansion of their
businesses and Duke Energy anticipates that certain of its subsidiaries will do
so in the future.

     The following description of the Junior Subordinated Notes is only a
summary and is not intended to be comprehensive. For additional information you
should refer to the Subordinated Indenture.

General

     The Subordinated Indenture does not limit the amount of Subordinated Notes,
including Junior Subordinated Notes, that Duke Energy may issue under it. Duke
Energy may issue Subordinated Notes, including Junior Subordinated Notes, from
time to time under the Subordinated Indenture in one or more series by entering
into supplemental indentures or by its Board of Directors or a duly authorized
committee authorizing the issuance. Two forms of supplemental indenture to the
Subordinated Indenture (one with respect to Junior Subordinated Notes initially
issued to a Trust and the other with respect to Junior Subordinated Notes
initially issued to the public) are exhibits to the registration statement, of
which this prospectus is a part.

     The Junior Subordinated Notes of a series need not be issued at the same
time, bear interest at the same rate or mature on the same date.

     The Subordinated Indenture does not protect the holders of Junior
Subordinated Notes if Duke Energy engages in a highly leveraged transaction.

Provisions Applicable to Particular Series

     The prospectus supplement for a particular series of Junior Subordinated
Notes being offered will disclose the specific terms related to the offering,
including the price or prices at which the Junior Subordinated Notes to be
offered will be issued. Those terms may include some or all of the following:

     o the title of the series;

     o the total principal amount of the Junior Subordinated Notes of the
       series;

     o the date or dates on which principal is payable or the method for
       determining the date or dates, and any right that Duke Energy has to
       change the date on which principal is payable;

     o the interest rate or rates, if any, or the method for determining the
       rate or rates, and the date or dates from which interest will accrue;

     o any interest payment dates and the regular record date for the interest
       payable on each interest payment date, if any;

     o whether Duke Energy may extend the interest payment periods and, if so,
       the terms of the extension;

     o the place or places where payments will be made;

     o whether Duke Energy has the option to redeem the Junior Subordinated
       Notes and, if so, the terms of its redemption option;

     o any obligation that Duke Energy has to redeem the Junior Subordinated
       Notes through a sinking fund or to purchase the Junior Subordinated Notes
       through a purchase fund or at the option of the holder;

                                        15


     o whether the provisions described under "Defeasance and Covenant
       Defeasance" will not apply to the Junior Subordinated Notes;

     o the currency in which payments will be made if other than U.S. dollars,
       and the manner of determining the equivalent of those amounts in U.S.
       dollars;

     o if payments may be made, at Duke Energy's election or at the holder's
       election, in a currency other than that in which the Junior Subordinated
       Notes are stated to be payable, then the currency in which those payments
       may be made, the terms and conditions of the election and the manner of
       determining those amounts;

     o the portion of the principal payable upon acceleration of maturity, if
       other than the entire principal;

     o whether the Junior Subordinated Notes will be issuable as global
       securities and, if so, the securities depositary;

     o any changes in the events of default or covenants with respect to the
       Junior Subordinated Notes;

     o any index or formula used for determining principal, premium or interest;

     o if the principal payable on the maturity date will not be determinable on
       one or more dates prior to the maturity date, the amount which will be
       deemed to be such principal amount or the manner of determining it;

     o the subordination of the Junior Subordinated Notes to any other of Duke
       Energy's indebtedness, including other series of Subordinated Notes; and

     o any other terms.

     The interest rate and interest and other payment dates of each series of
Junior Subordinated Notes issued to a Trust will correspond to the rate at which
distributions will be paid and the distribution and other payment dates of the
Preferred Securities of that Trust.

     Unless Duke Energy states otherwise in the applicable prospectus
supplement, Duke Energy will issue the Junior Subordinated Notes only in fully
registered form without coupons, and there will be no service charge for any
registration of transfer or exchange of the Junior Subordinated Notes. Duke
Energy may, however, require payment to cover any tax or other governmental
charge payable in connection with any transfer or exchange. Subject to the terms
of the Subordinated Indenture and the limitations applicable to global
securities, transfers and exchanges of the Junior Subordinated Notes may be made
at JPMorgan Chase Bank, 450 West 33rd Street, New York, New York 10001 or at any
other office maintained by Duke Energy for such purpose.

     The Junior Subordinated Notes will be issuable in denominations of $1,000
and any integral multiples of $1,000, unless Duke Energy states otherwise in the
applicable prospectus supplement.

     Duke Energy may offer and sell the Junior Subordinated Notes, including
original issue discount Junior Subordinated Notes, at a substantial discount
below their principal amount. The applicable prospectus supplement will describe
special United States federal income tax and any other considerations applicable
to those securities. In addition, the applicable prospectus supplement may
describe certain special United States federal income tax or other
considerations, if any, applicable to any Junior Subordinated Notes that are
denominated in a currency other than U.S. dollars.

Global Securities

     Duke Energy may issue some or all of the Junior Subordinated Notes as
book-entry securities. Any such book-entry securities will be represented by one
or more fully registered global certificates. Duke Energy will register each
global security with or on behalf of a securities depositary identified in the
applicable prospectus supplement. Each global security will be deposited with
the securities depositary or its nominee or a custodian for the securities
depositary.

                                        16


     As long as the securities depositary or its nominee is the registered
holder of a global security representing Junior Subordinated Notes, that person
will be considered the sole owner and holder of the global security and the
Junior Subordinated Notes it represents for all purposes. Except in limited
circumstances, owners of beneficial interests in a global security:

     o may not have the global security or any Junior Subordinated Notes it
       represents registered in their names;

     o may not receive or be entitled to receive physical delivery of
       certificated Junior Subordinated Notes in exchange for the global
       security; and

     o will not be considered the owners or holders of the global security or
       any Junior Subordinated Notes it represents for any purposes under the
       Junior Subordinated Notes or the Subordinated Indenture.

     Duke Energy will make all payments of principal and any premium and
interest on a global security to the securities depositary or its nominee as the
holder of the global security. The laws of some jurisdictions require that
certain purchasers of securities take physical delivery of securities in
definitive form. These laws may impair the ability to transfer beneficial
interests in a global security.

     Ownership of beneficial interests in a global security will be limited to
institutions having accounts with the securities depositary or its nominee,
which are called "participants" in this discussion, and to persons that hold
beneficial interests through participants. When a global security representing
Junior Subordinated Notes is issued, the securities depositary will credit on
its book-entry, registration and transfer system the principal amounts of Junior
Subordinated Notes the global security represents to the accounts of its
participants. Ownership of beneficial interests in a global security will be
shown only on, and the transfer of those ownership interests will be effected
only through, records maintained by:

     o the securities depositary, with respect to participants' interests; and

     o any participant, with respect to interests the participant holds on
       behalf of other persons.

     Payments participants make to owners of beneficial interests held through
those participants will be the responsibility of those participants. The
securities depositary may from time to time adopt various policies and
procedures governing payments, transfers, exchanges and other matters relating
to beneficial interests in a global security. None of the following will have
any responsibility or liability for any aspect of the securities depositary's or
any participant's records relating to beneficial interests in a global security
representing Junior Subordinated Notes, for payments made on account of those
beneficial interests or for maintaining, supervising or reviewing any records
relating to those beneficial interests:

     o Duke Energy;

     o the Subordinated Indenture Trustee;

     o the Trust (if the Junior Subordinated Notes are issued to a Trust); or

     o any agent of any of them.

Redemption

     Provisions relating to the redemption of Junior Subordinated Notes will be
set forth in the applicable prospectus supplement. Unless Duke Energy states
otherwise in the applicable prospectus supplement, Duke Energy may redeem Junior
Subordinated Notes only upon notice mailed at least 30 but not more than 60 days
before the date fixed for redemption.

     Duke Energy will not be required to:

     o issue, register the transfer of, or exchange any Junior Subordinated
       Notes of a series during the period beginning 15 days before the date the
       notice is mailed identifying the Junior Subordinated Notes of that series
       that have been selected for redemption; or

                                        17


     o register the transfer of or exchange any Junior Subordinated Note of that
       series selected for redemption except the unredeemed portion of a Junior
       Subordinated Note being partially redeemed.

Consolidation, Merger, Conveyance or Transfer

     The Subordinated Indenture provides that Duke Energy may consolidate or
merge with or into, or convey or transfer all or substantially all of its
properties and assets to, another corporation or other entity. Any successor
must, however, assume Duke Energy's obligations under the Subordinated Indenture
and the Subordinated Notes, including the Junior Subordinated Notes, and Duke
Energy must deliver to the Subordinated Indenture Trustee a statement by certain
of its officers and an opinion of counsel that affirm compliance with all
conditions in the Subordinated Indenture relating to the transaction. When those
conditions are satisfied, the successor will succeed to and be substituted for
Duke Energy under the Subordinated Indenture, and Duke Energy will be relieved
of its obligations under the Subordinated Indenture and any Subordinated Notes,
including the Junior Subordinated Notes.

Modification; Waiver

     Duke Energy may modify the Subordinated Indenture with the consent of the
holders of a majority in principal amount of the outstanding Subordinated Notes
of all series that are affected by the modification, voting as one class. The
consent of the holder of each outstanding Subordinated Note affected is,
however, required to:

     o change the maturity date of the principal or any installment of principal
       or interest on that Subordinated Note;

     o reduce the principal amount, the interest rate or any premium payable
       upon redemption on that Subordinated Note;

     o reduce the amount of principal due and payable upon acceleration of
       maturity;

     o change the currency of payment of principal, premium or interest on that
       Subordinated Note;

     o impair the right to institute suit to enforce any such payment on or
       after the maturity date or redemption date;

     o reduce the percentage in principal amount of Subordinated Notes of any
       series required to modify the Subordinated Indenture, waive compliance
       with certain restrictive provisions of the Subordinated Indenture or
       waive certain defaults; or

     o with certain exceptions, modify the provisions of the Subordinated
       Indenture governing modifications of the Subordinated Indenture or
       governing waiver of covenants or past defaults.

In addition, Duke Energy may modify the Subordinated Indenture for certain other
purposes, without the consent of any holders of Subordinated Notes, including
Junior Subordinated Notes.

     The holders of a majority in principal amount of the outstanding Junior
Subordinated Notes of any series may waive, for that series, Duke Energy's
compliance with certain restrictive provisions of the Subordinated Indenture.
The holders of a majority in principal amount of the outstanding Subordinated
Notes of all series under the Subordinated Indenture with respect to which a
default has occurred and is continuing, voting as one class, may waive that
default for all those series, except a default in the payment of principal or
any premium or interest on any Subordinated Note or a default with respect to a
covenant or provision which cannot be modified without the consent of the holder
of each outstanding Subordinated Note of the series affected.

     Duke Energy may not amend the Subordinated Indenture to change the
subordination of any outstanding Junior Subordinated Notes without the consent
of each holder of Senior Indebtedness that the amendment would adversely affect.

                                        18


Events of Default

     The following are events of default under the Subordinated Indenture with
respect to any series of Junior Subordinated Notes, unless Duke Energy states
otherwise in the applicable prospectus supplement:

     o failure to pay principal of or any premium on any Junior Subordinated
       Note of that series when due;

     o failure to pay when due any interest on any Junior Subordinated Note of
       that series that continues for 60 days; for this purpose, the date on
       which interest is due is the date on which Duke Energy is required to
       make payment following any deferral of interest payments by it under the
       terms of Junior Subordinated Notes that permit such deferrals;

     o failure to make any sinking fund payment when required for any Junior
       Subordinated Note of that series that continues for 60 days;

     o failure to perform any covenant in the Subordinated Indenture (other than
       a covenant expressly included solely for the benefit of other series)
       that continues for 90 days after the Subordinated Indenture Trustee or
       the holders of at least 33% of the outstanding Junior Subordinated Notes
       of that series give Duke Energy written notice of the default; and

     o certain bankruptcy, insolvency or reorganization events with respect to
       Duke Energy.

In the case of the fourth event of default listed above, the Subordinated
Indenture Trustee may extend the grace period. In addition, if holders of a
particular series have given a notice of default, then holders of at least the
same percentage of Junior Subordinated Notes of that series, together with the
Subordinated Indenture Trustee, may also extend the grace period. The grace
period will be automatically extended if Duke Energy has initiated and is
diligently pursuing corrective action.

     Duke Energy may establish additional events of default for a particular
series and, if established, any such events of default will be described in the
applicable prospectus supplement.

     If an event of default with respect to Junior Subordinated Notes of a
series occurs and is continuing, then the Subordinated Indenture Trustee or the
holders of at least 33% in principal amount of the outstanding Junior
Subordinated Notes of that series may declare the principal amount of all Junior
Subordinated Notes of that series to be immediately due and payable. However,
that event of default will be considered waived at any time after the
declaration but before a judgment for payment of the money due has been obtained
if:

     o Duke Energy has paid or deposited with the Subordinated Indenture Trustee
       all overdue interest, the principal and any premium due otherwise than by
       the declaration and any interest on such amounts, and any interest on
       overdue interest, to the extent legally permitted, in each case with
       respect to that series, and all amounts due to the Subordinated Indenture
       Trustee; and

     o all events of default with respect to that series, other than the
       nonpayment of the principal that became due solely by virtue of the
       declaration, have been cured or waived.

     In the case of Junior Subordinated Notes issued to a Trust, a holder of
Preferred Securities may institute a legal proceeding directly against Duke
Energy, without first instituting a legal proceeding against the Property
Trustee of the Trust by which those Preferred Securities were issued or any
other person or entity, for enforcement of payment to that holder of principal
or interest on an equivalent amount of Junior Subordinated Notes of the related
series on or after the due dates specified in those Junior Subordinated Notes.

     The Subordinated Indenture Trustee is under no obligation to exercise any
of its rights or powers at the request or direction of any holders of Junior
Subordinated Notes unless those holders have offered the Subordinated Indenture
Trustee security or indemnity against the costs, expenses and liabilities that
it might incur as a result. The holders of a majority in principal amount of the
outstanding Junior Subordinated Notes of any series have, with certain
exceptions, the right to direct the time, method and

                                        19


place of conducting any proceedings for any remedy available to the Subordinated
Indenture Trustee or the exercise of any power of the Subordinated Indenture
Trustee with respect to those Junior Subordinated Notes. The Subordinated
Indenture Trustee may withhold notice of any default, except a default in the
payment of principal or interest, from the holders of any series if the
Subordinated Indenture Trustee in good faith considers it in the interest of the
holders to do so.

     The holder of any Junior Subordinated Note will have an absolute and
unconditional right to receive payment of the principal, any premium and, within
certain limitations, any interest on that Junior Subordinated Note on its
maturity date or redemption date and to enforce those payments.

     Duke Energy is required to furnish each year to the Subordinated Indenture
Trustee a statement by certain of its officers to the effect that it is not in
default under the Subordinated Indenture or, if there has been a default,
specifying the default and its status.

Payments; Paying Agent

     The paying agent will pay the principal of any Junior Subordinated Notes
only if those Junior Subordinated Notes are surrendered to it. The paying agent
will pay interest on Junior Subordinated Notes issued as global securities by
wire transfer to the holder of those global securities. Unless Duke Energy
states otherwise in the applicable prospectus supplement, the paying agent will
pay interest on Junior Subordinated Notes that are not in global form at its
office or, at Duke Energy's option:

     o by wire transfer to an account at a banking institution in the United
       States that is designated in writing to the Subordinated Indenture
       Trustee at least 16 days prior to the date of payment by the person
       entitled to that interest; or

     o by check mailed to the address of the person entitled to that interest as
       that address appears in the security register for those Junior
       Subordinated Notes.

     Unless Duke Energy states otherwise in the applicable prospectus
supplement, the Subordinated Indenture Trustee will act as paying agent for that
series of Junior Subordinated Notes, and the principal corporate trust office of
the Subordinated Indenture Trustee will be the office through which the paying
agent acts. Duke Energy may, however, change or add paying agents or approve a
change in the office through which a paying agent acts.

     Any money that Duke Energy has paid to a paying agent for principal or
interest on any Junior Subordinated Notes that remains unclaimed at the end of
two years after that principal or interest has become due will be repaid to Duke
Energy at its request. After repayment to Duke Energy, holders should look only
to Duke Energy for those payments.

Defeasance and Covenant Defeasance

     The Subordinated Indenture provides that Duke Energy may be:

     o discharged from its obligations, with certain limited exceptions, with
       respect to any series of Junior Subordinated Notes, as described in the
       Subordinated Indenture, such a discharge being called a "defeasance" in
       this prospectus; and

     o released from its obligations under certain restrictive covenants
       especially established with respect to a series of Junior Subordinated
       Notes, as described in the Subordinated Indenture, such a release being
       called a "covenant defeasance" in this prospectus.

     Duke Energy must satisfy certain conditions to effect a defeasance or
covenant defeasance. Those conditions include the irrevocable deposit with the
Subordinated Indenture Trustee, in trust, of money or government obligations
which through their scheduled payments of principal and interest would provide
sufficient money to pay the principal and any premium and interest on those
Junior Subordinated Notes on the maturity dates of those payments or upon
redemption. Following a defeasance, payment of the Junior

                                        20


Subordinated Notes defeased may not be accelerated because of an event of
default under the Subordinated Indenture.

     Under current United States federal income tax laws, a defeasance would be
treated as an exchange of the relevant Junior Subordinated Notes in which
holders of those Junior Subordinated Notes might recognize gain or loss. In
addition, the amount, timing and character of amounts that holders would
thereafter be required to include in income might be different from that which
would be includible in the absence of that defeasance. Duke Energy urges
investors to consult their own tax advisors as to the specific consequences of a
defeasance, including the applicability and effect of tax laws other than United
States federal income tax laws.

     Junior Subordinated Notes issued to a Trust will not be subject to covenant
defeasance.

Subordination

     Each series of Junior Subordinated Notes will be subordinate and junior in
right of payment, to the extent set forth in the Subordinated Indenture, to all
Senior Indebtedness as defined below. If:

     o Duke Energy makes a payment or distribution of any of its assets to
       creditors upon its dissolution, winding-up, liquidation or
       reorganization, whether in bankruptcy, insolvency or otherwise;

     o a default beyond any grace period has occurred and is continuing with
       respect to the payment of principal, interest or any other monetary
       amounts due and payable on any Senior Indebtedness; or

     o the maturity of any Senior Indebtedness has been accelerated because of a
       default on that Senior Indebtedness,

then the holders of Senior Indebtedness generally will have the right to receive
payment, in the case of the first instance, of all amounts due or to become due
upon that Senior Indebtedness, and, in the case of the second and third
instances, of all amounts due on the Senior Indebtedness, or Duke Energy will
make provision for those payments, before the holders of any Junior Subordinated
Notes have the right to receive any payments of principal or interest on their
Junior Subordinated Notes.

     "Senior Indebtedness" means, with respect to any series of Junior
Subordinated Notes, the principal, premium, interest and any other payment in
respect of any of the following:

     o all of Duke Energy's indebtedness that is evidenced by notes, debentures,
       bonds or other securities Duke Energy sells for money or other
       obligations for money borrowed;

     o all indebtedness of others of the kinds described in the preceding
       category which Duke Energy has assumed or guaranteed or which Duke Energy
       has in effect guaranteed through an agreement to purchase, contingent or
       otherwise; and

     o all renewals, extensions or refundings of indebtedness of the kinds
       described in either of the preceding two categories.

     Any such indebtedness, renewal, extension or refunding, however, will not
be Senior Indebtedness if the instrument creating or evidencing it or the
assumption or guarantee of it provides that it is not superior in right of
payment to or is equal in right of payment with those Junior Subordinated Notes.
Senior Indebtedness will be entitled to the benefits of the subordination
provisions in the Subordinated Indenture irrespective of the amendment,
modification or waiver of any term of the Senior Indebtedness.

     Future series of Subordinated Notes that are not Junior Subordinated Notes
may rank senior to outstanding series of Junior Subordinated Notes and would
constitute Senior Indebtedness with respect to those series.

     The Subordinated Indenture does not limit the amount of Senior Indebtedness
that Duke Energy may issue. As of June 30, 2002, Duke Energy's Senior
Indebtedness totaled approximately $4,600,000,000.

                                        21


Concerning the Subordinated Indenture Trustee

     JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the
Subordinated Indenture Trustee and is also the Senior Indenture Trustee and the
trustee under Duke Energy's First and Refunding Mortgage. Duke Energy and
certain of its affiliates maintain deposit accounts and banking relationships
with JPMorgan Chase Bank. JPMorgan Chase Bank also serves as trustee or agent
under other indentures and agreements pursuant to which securities of Duke
Energy and of certain of its affiliates are outstanding.

     The Subordinated Indenture Trustee will perform only those duties that are
specifically set forth in the Subordinated Indenture unless an event of default
under the Subordinated Indenture occurs and is continuing. In case an event of
default occurs and is continuing, the Subordinated Indenture Trustee will
exercise the same degree of care as a prudent individual would exercise in the
conduct of his or her own affairs.

             DESCRIPTION OF THE FIRST AND REFUNDING MORTGAGE BONDS

     Duke Energy will issue the First and Refunding Mortgage Bonds in one or
more series under its First and Refunding Mortgage, dated as of December 1,
1927, to JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank), as
Trustee, as supplemented and amended. The First and Refunding Mortgage is
sometimes called the "Mortgage" and the First and Refunding Mortgage Bonds are
sometimes called the "Bonds" in this prospectus. The trustee under the Mortgage
is sometimes called the "Bond Trustee" in this prospectus. The Mortgage is an
exhibit to the registration statement, of which this prospectus is a part.

     The following description of the Bonds is only a summary and is not
intended to be comprehensive. For additional information you should refer to the
Mortgage.

General

     The amount of Bonds that Duke Energy may issue under the Mortgage is
unlimited. Duke Energy's Board of Directors will determine the terms of each
series of Bonds, including denominations, maturity, interest rate and payment
terms and whether the series will have redemption or sinking fund provisions.

     Unless Duke Energy states otherwise in the applicable prospectus
supplement, Duke Energy will issue the Bonds only in fully registered form
without coupons and there will be no service charge for any transfers and
exchanges of the Bonds. Duke Energy may, however, require payment to cover any
stamp tax or other governmental charge payable in connection with any transfer
or exchange. Transfers and exchanges of the Bonds may be made at JPMorgan Chase
Bank, 450 West 33rd Street, New York, New York 10001 or at any other office
maintained by Duke Energy for such purpose.

     The Bonds will be issuable in denominations of $1,000 and multiples of
$1,000, unless Duke Energy states otherwise in the applicable prospectus
supplement. The Bonds will be exchangeable for an equivalent principal amount of
Bonds of other authorized denominations of the same series.

     The prospectus supplement for a particular series of Bonds will describe
the maturity, interest rate and payment terms of those Bonds and any relevant
redemption or sinking fund provisions.

Security

     The Mortgage creates a continuing lien to secure the payment of principal
and interest on the Bonds. All the Bonds are equally and ratably secured without
preference, priority or distinction. The lien of the Mortgage covers
substantially all of Duke Energy's properties, real, personal and mixed, and
Duke Energy's franchises, including properties acquired after the date of the
Mortgage, with certain exceptions. Those exceptions include cash, accounts
receivable, inventories of materials and supplies, merchandise held for sale,
securities that Duke Energy holds, certain after-acquired property not useful in
Duke Energy's electric business, certain after-acquired franchises and certain
after-acquired non-electric properties.
                                        22


     The lien of the Mortgage is subject to certain permitted liens and to liens
that exist upon properties that Duke Energy acquired after it entered into the
Mortgage to the extent of the amounts of prior lien bonds secured by those
properties (not, however, exceeding 75% of the cost or value of those
properties) and additions to those properties. "Prior lien bonds" are bonds or
other indebtedness that are secured at the time of acquisition by a lien upon
property that Duke Energy acquires after the date of the Mortgage that becomes
subject to the lien of the Mortgage.

Issuance of Additional Bonds

     If Duke Energy satisfies the conditions in the Mortgage, the Bond Trustee
may authenticate and deliver additional Bonds in an aggregate principal amount
not exceeding:

     o the amount of cash that Duke Energy has deposited with the Bond Trustee
       for that purpose;

     o the amount of previously authenticated and delivered Bonds or refundable
       prior lien bonds that have been or are to be retired which, with certain
       exceptions, Duke Energy has deposited with the Bond Trustee for that
       purpose; or

     o 66 2/3% of the aggregate of the net amounts of additional property
       (electric) certified to the Bond Trustee after February 18, 1949.

     The Bond Trustee may not authenticate and deliver any additional Bonds
under the Mortgage, other than certain types of refunding Bonds, unless Duke
Energy's available net earnings for twelve consecutive calendar months within
the immediately preceding fifteen calendar months have been at least twice the
amount of the annual interest charges on all Bonds outstanding under the
Mortgage, including the Bonds proposed to be issued, and on all outstanding
prior lien bonds that the Bond Trustee does not hold under the Mortgage.

     Duke Energy may not apply to the Bond Trustee to authenticate and deliver
any Bonds (1) in an aggregate principal amount exceeding $26,000,000 on the
basis of additional property (electric) that Duke Energy acquired or constructed
prior to January 1, 1949 or (2) on the basis of Bonds or prior lien bonds paid,
purchased or redeemed prior to February 1, 1949. Duke Energy may not certify any
additional property (electric) which is subject to the lien of any prior lien
bonds for the purpose of establishing those prior lien bonds as refundable if
the aggregate principal amount of those prior lien bonds exceeds 66 2/3% of the
net amount of the additional property that is subject to the lien of such prior
lien bonds.

Release Provisions

     The Mortgage permits Duke Energy to dispose of certain property and to take
other actions without the Bond Trustee releasing that property. The Mortgage
also permits the release of mortgaged property if Duke Energy deposits cash or
other consideration equal to the value of the mortgaged property to be released.
In certain events and within certain limitations, the Bond Trustee is required
to pay out cash that the Bond Trustee receives -- other than for the Replacement
Fund or as the basis for issuing Bonds -- upon Duke Energy's application.

     Duke Energy may withdraw cash that it deposited with the Bond Trustee as
the basis for issuing Bonds in an amount equal to the principal amount of any
Bonds that it is entitled to have authenticated and delivered on the basis of
additional property (electric), on the basis of Bonds previously authenticated
and delivered or on the basis of refundable prior lien bonds.

Replacement Fund

     The Mortgage requires Duke Energy to deposit with the Bond Trustee
annually, for the Replacement Fund established under the Mortgage, the sum of
the "replacement requirements" for all years beginning with 1949 and ending with
the last calendar year preceding the deposit date, less certain deductions.
Those deductions are (1) the aggregate original cost of all fixed property
(electric) retired during that time period, not exceeding the aggregate of the
gross amounts of additional property (electric) that Duke

                                        23


Energy acquired or constructed during the same period, and (2) the aggregate
amount of cash that Duke Energy deposited with the Bond Trustee up to that time,
or that Duke Energy would have been required to deposit except for permitted
reductions, under the Replacement Fund.

     The "replacement requirement" for any year is 2 1/2% of the average "amount
of depreciable fixed property" (electric) owned by Duke Energy at the beginning
and end of that year, not exceeding, however, the amount Duke Energy is
permitted to charge as an operating expense for depreciation or retirement by
any governmental authority, or the amount deductible as depreciation or similar
expense for federal income tax purposes. The "amount of depreciable fixed
property" (electric) is the amount by which the sum of $192,913,385 plus the
aggregate gross amount of all depreciable additional property (electric) that
Duke Energy acquired or constructed from January 1, 1949 to the date as of which
such amount is determined exceeds the original cost of all of Duke Energy's
depreciable fixed property (electric) retired during that period or released
from the lien of the Mortgage.

     Duke Energy may reduce the amount of cash at any time required to be
deposited in the Replacement Fund and may withdraw any cash that it previously
deposited that is held in the Replacement Fund:

     o in an amount equal to 150% of the principal amount of Bonds previously
       authenticated and delivered under the Mortgage, or refundable prior lien
       bonds, deposited with the Bond Trustee and on the basis of which Duke
       Energy would otherwise have been entitled to have additional Bonds
       authenticated and delivered; and

     o in an amount equal to 150% of the principal amount of Bonds which Duke
       Energy would otherwise be entitled to have authenticated and delivered on
       the basis of additional property (electric).

     Upon Duke Energy's application, the Bond Trustee will apply cash that Duke
Energy deposited in the Replacement Fund and has not previously withdrawn to the
payment, purchase or redemption of Bonds issued under the Mortgage or to the
purchase of refundable prior lien bonds.

     Duke Energy has never deposited any cash with the Bond Trustee for the
Replacement Fund. If Duke Energy deposits any cash in the future, it has agreed
not to apply that cash to the redemption of the Bonds as long as any Bonds then
outstanding remain outstanding.

Amendments of the Mortgage

     Duke Energy may amend the Mortgage with the consent of the holders of
66 2/3% in principal amount of the Bonds, except that no such amendment may:

     o affect the terms of payment of principal at maturity or of interest or
       premium on any Bond;

     o affect the rights of Bondholders to sue to enforce any such payment at
       maturity; or

     o reduce the percentage of Bonds required to consent to an amendment.

     No amendment may affect the rights under the Mortgage of the holders of
less than all of the series of Bonds outstanding unless the holders of 66 2/3%
in principal amount of the Bonds of each series affected consent to the
amendment.

     The covenants included in the supplemental indenture for any series of
Bonds to be issued will be solely for the benefit of the holders of those Bonds.
Duke Energy may modify any such covenant only with the consent of the holders of
66 2/3% in principal amount of those Bonds outstanding, without the consent of
Bondholders of any other series.

Events of Default

     The Bond Trustee may, and at the written request of the holders of a
majority in principal amount of the outstanding Bonds will, declare the
principal of all outstanding Bonds due when any event of default

                                        24


under the Mortgage occurs. The holders of a majority in principal amount of the
outstanding Bonds may, however, waive the default and rescind the declaration if
Duke Energy cures the default.

     Events of default under the Mortgage include:

     o default in the payment of principal;

     o default for 60 days in the payment of interest;

     o default in the performance of any other covenant in the Mortgage
       continuing for 60 days after the Bond Trustee or the holders of not less
       than 10% in principal amount of the Bonds then outstanding give notice of
       the default; and

     o certain bankruptcy or insolvency events with respect to Duke Energy.

     Duke Energy provides a statement by certain of its officers each year to
the Bond Trustee stating whether it has complied with the covenants of the
Mortgage.

Concerning the Bond Trustee

     JPMorgan Chase Bank (formerly known as The Chase Manhattan Bank) is the
Bond Trustee and is also the Senior Indenture Trustee and the Subordinated
Indenture Trustee. Duke Energy and certain of its affiliates maintain deposit
accounts and banking relationships with JPMorgan Chase Bank. JPMorgan Chase Bank
also serves as trustee or agent under other indentures and agreements pursuant
to which securities of Duke Energy and of certain of its affiliates are
outstanding.

     The Bond Trustee is under no obligation to exercise any of its powers at
the request of any of the holders of the Bonds unless those Bondholders have
offered to the Bond Trustee security or indemnity satisfactory to it against the
cost, expenses and liabilities it might incur as a result. The holders of a
majority in principal amount of the Bonds outstanding may direct the time,
method and place of conducting any proceeding for any remedy available to the
Bond Trustee, or the exercise of any trust or power of the Bond Trustee. The
Bond Trustee will not be liable for any action that it takes or omits to take in
good faith in accordance with any such direction.

                        DESCRIPTION OF THE COMMON STOCK

     The following description of Duke Energy's Common Stock is only a summary
and is not intended to be comprehensive. For additional information you should
refer to the applicable provisions of the North Carolina Business Corporation
Act and Duke Energy's Restated Articles of Incorporation (Articles) and By-Laws.
The Articles and By-Laws are exhibits to the registration statement, of which
this prospectus is a part.

General

     Duke Energy is authorized to issue up to 2,000,000,000 shares of Common
Stock. At June 30, 2002, approximately 832,000,000 shares of Common Stock were
outstanding. Duke Energy is also authorized to issue up to 12,500,000 shares of
Preferred Stock, 10,000,000 shares of Preferred Stock A, 20,000,000 shares of
Serial Preferred Stock and 1,500,000 shares of Preference Stock. At June 30,
2002, 2,154,984 shares of Preferred Stock, 1,257,185 shares of Preferred Stock A
and no shares of Serial Preferred Stock or Preference Stock were outstanding.
The Preferred Stock, Preferred Stock A, Serial Preferred Stock and Preference
Stock together are sometimes called the "Preferred Stocks."

Dividends

     Holders of Common Stock are entitled to such dividends as may be declared
from time to time by the Board of Directors from legally available funds but
only if full dividends on all outstanding series of the Preferred Stocks for the
then current and all prior dividend periods and any required sinking fund
payments with respect to any outstanding series of such securities have been
paid or provided for.

                                        25


Voting Rights

     Subject to the rights, if any, of the holders of the Preferred Stocks that
may be outstanding or as otherwise provided by law, the holders of Common Stock
have exclusive voting rights, each share being entitled to one vote. Holders of
Common Stock have noncumulative voting rights, which means that the holders of
more than 50% of the shares voting for the election of directors can elect 100%
of the directors and the holders of the remaining shares voting for the election
of directors will not be able to elect any directors.

     Whenever dividends on any part of any outstanding Preferred Stock or
Preferred Stock A are in arrears in an amount equivalent to the total dividends
required to be paid on that Preferred Stock or Preferred Stock A in any period
of 12 calendar months, the holders of the Preferred Stock as a class have the
exclusive right to elect a majority of the authorized number of directors and
the holders of the Preferred Stock A as a class have the exclusive right to
elect two directors. Those rights cease whenever Duke Energy pays all accrued
and unpaid dividends in full. Whenever six quarterly dividends on any
outstanding series of the Preference Stock are in arrears or any required
sinking fund payments are in default, the holders of the Preference Stock as a
class have the exclusive right to elect two directors. This right ceases
whenever all dividends and required sinking fund obligations in default have
been paid in full or provided for. In addition, the consent of the holders of
specified percentages of any outstanding Preferred Stock, Preferred Stock A or
Preference Stock, or some or all of the holders of such classes, is required in
connection with certain increases in authorized amounts of or changes in stock
senior to the Common Stock or in connection with any sale of substantially all
of Duke Energy's assets or certain mergers.

     The holders of the Serial Preferred Stock will have such voting rights as a
series or otherwise with respect to the election of directors or otherwise as
may be fixed by the Board of Directors at the time of the creation of the
series, in addition to any voting rights provided by law.

Rights Upon Liquidation

     The holders of Common Stock are entitled in liquidation to share ratably in
the assets of Duke Energy after payment of all debts and liabilities and after
required preferential payments to the holders of outstanding Preferred Stocks.

Miscellaneous

     The outstanding shares of Common Stock are, and the shares of Common Stock
sold hereunder will be, upon payment for them, fully paid and nonassessable.
Holders of Common Stock have no preemptive rights and no conversion rights. The
Common Stock is not subject to redemption and is not entitled to the benefit of
any sinking fund provisions.

     If so provided by the Board of Directors at the time of creation of any
series of Serial Preferred Stock, the shares of such series may be convertible
or exchangeable into shares of Common Stock or other securities of Duke Energy
or of any other corporation or other entity, upon terms fixed at the time of
creation of the series.

Transfer Agent and Registrar

     Duke Energy acts as transfer agent and registrar for the Common Stock.

Preference Stock Purchase Rights

     Each share of Common Stock has attached to it a Preference Stock Purchase
Right. The Rights initially are represented only by the certificates for the
shares of Common Stock and will not trade separately from those shares unless
and until:

     o ten days after it is publicly announced that a person or group (with
       certain exceptions) has acquired, or has obtained the right to acquire,
       the beneficial ownership of 15% or more of the outstanding Common Stock
       (an "acquiring person"); or

                                        26


     o ten business days (or a later date determined by Duke Energy's Board of
       Directors) after the date a person or group commences, or public
       announcement is made that the person or group intends to commence, a
       tender or exchange offer that would result in the person or group
       becoming an acquiring person.

If and when the Rights separate, each Right will entitle the holder to purchase
1/10,000 of a share of Duke Energy's Series A Participating Preference Stock for
an exercise price that is presently $190.

     In the event that a person or group becomes an acquiring person, each Right
(except for Rights beneficially owned by the acquiring person or its
transferees, which Rights become void) will entitle its holder to purchase, for
the exercise price, a number of shares of Common Stock having a market value of
twice the exercise price. Also, if, after ten days following the date of the
announcement that a person or group has become an acquiring person:

     o Duke Energy is involved in a merger or similar form of business
       combination in which Duke Energy is not the surviving corporation or in
       which Duke Energy is the surviving corporation but the Common Stock is
       changed or exchanged; or

     o more than 50% of Duke Energy's assets or earning power is sold or
       transferred;

then each Right (except for voided Rights) will entitle its holder to purchase,
for the exercise price, a number of shares of common stock of the acquiring
company having a value of twice the exercise price. If any person or group
acquires from 15% to but excluding 50% of the outstanding Common Stock, Duke
Energy's Board of Directors may, at its option, exchange each outstanding Right
(except for those held by an acquiring person or its transferees) for one share
of Common Stock or 1/10,000 of a share of Series A Participating Preference
Stock.

     Duke Energy's Board of Directors may redeem the Rights for $0.01 per Right
prior to ten business days after the date of the public announcement that a
person or group has become an acquiring person.

     The Rights will not prevent a takeover of Duke Energy. However, the
existence of the Rights may cause substantial dilution to a person or group that
acquires 15% or more of the Common Stock unless the Board of Directors first
redeems those Rights.

Certain Anti-Takeover Matters

     Duke Energy's Articles and By-Laws include a number of provisions that may
have the effect of encouraging persons considering unsolicited tender offers or
other unilateral takeover proposals to negotiate with the Board of Directors
rather than pursue non-negotiated takeover attempts. Those provisions include:

 Classified Board of Directors; Removal of Directors; Vacancies

     Duke Energy's Articles provide for a Board of Directors divided into three
classes, with one class being elected each year to serve for a three-year term.
As a result, at least two annual meetings of shareholders may be required for
shareholders to change a majority of the Board of Directors. Duke Energy's
shareholders may remove directors only for cause. Vacancies and newly created
directorships on the Board of Directors may be filled only by the affirmative
vote of a majority of the directors remaining in office, and no decrease in the
number of directors may shorten the term of an incumbent director. The
classification of directors and the inability of shareholders to remove
directors without cause and to fill vacancies and newly created directorships on
the Board of Directors will make it more difficult to change the composition of
the Board of Directors, but will promote continuity of existing management.

 Advance Notice Requirements

     Duke Energy's By-Laws establish advance notice procedures with regard to
shareholder proposals relating to the nomination of persons for election as
directors or new business to be brought before annual meetings of shareholders.
These procedures provide that shareholders must give timely notice of such
proposals in writing to the Secretary of Duke Energy. Generally, to be timely
with respect to an annual meeting of shareholders, notice must be received at
Duke Energy's principal executive offices not less than 90 days nor more than
120 days prior to the first anniversary date of the annual meeting for the
preceding year. The notice must contain certain information specified in the
By-Laws.

                                        27


 Special Meetings of Shareholders

     Neither the Articles nor the By-Laws of Duke Energy give shareholders the
right to call a special meeting of shareholders. The By-Laws provide that
special meetings of shareholders may be called only by the Board of Directors or
the Chairman of the Board.

 Amendment of Charter and By-Laws

     Duke Energy's Articles require the approval of not less than 80% of the
voting power of all outstanding shares of Common Stock to amend provisions
relating to the minimum and maximum size of the Board of Directors, the
classification of the Board of Directors, the removal of directors, the filling
of vacancies and newly created directorships on the Board of Directors and the
requirement that a decrease in the number of directors constituting the Board of
Directors may not shorten the term of any incumbent director. Duke Energy's
Articles also require the affirmative vote of the holders of at least a majority
of the combined voting power of the then outstanding shares of stock of all
classes entitled to vote generally in the election of directors, voting together
as a single class, for the shareholders to adopt, amend or repeal any provisions
in the By-Laws. This voting requirement also applies to any amendment or repeal
of this provision or the adoption of any provision inconsistent with it. These
amendment provisions will make it more difficult to dilute the anti-takeover
effects of Duke Energy's Articles and By-Laws.

 Serial Preferred Stock

     Serial Preferred Stock can be, and has been, used by corporations
specifically for anti-takeover purposes. For example, shares of Serial Preferred
Stock can be privately placed with purchasers who support a board of directors
in opposing a tender offer or other hostile takeover bid, or can be issued to
dilute the stock ownership and voting power of a third party seeking a merger or
other extraordinary corporate transaction. Under these and similar
circumstances, the Serial Preferred Stock can serve to perpetuate incumbent
management and can adversely affect shareholders who may want to participate in
the tender offer or other transaction.

     Duke Energy's Board of Directors has adopted resolutions that state that
the Serial Preferred Stock:

     a) not be used for the principal purpose of acting as an anti-takeover
        device without shareholder approval; and

     b) not be given supermajority voting rights except possibly with respect to
        proposed amendments to the Articles of Incorporation altering materially
        existing provisions of the Serial Preferred Stock or creating, or
        increasing the authorized amount of, any class of stock ranking, as to
        dividend or assets, prior to the Serial Preferred Stock.

                  DESCRIPTION OF THE STOCK PURCHASE CONTRACTS
                          AND THE STOCK PURCHASE UNITS

     Duke Energy may issue stock purchase contracts representing contracts
obligating holders to purchase from Duke Energy, and Duke Energy to sell to the
holders, a specified number of shares of Common Stock (or a range of numbers of
shares pursuant to a predetermined formula) at a future date or dates. The price
per share of Common Stock may be fixed at the time the stock purchase contracts
are issued or may be determined by reference to a specific formula set forth in
the stock purchase contracts.

     The stock purchase contracts may be issued separately or as a part of
units, often known as stock purchase units, consisting of a stock purchase
contract and either:

     o Senior Notes, Junior Subordinated Notes or other debt securities of Duke
       Energy or one of its subsidiaries;

     o debt obligations of third parties, including U.S. Treasury securities; or

     o Preferred Securities or trust preferred securities issued by trusts, all
       of whose common securities are owned by Duke Energy or by subsidiaries of
       Duke Energy,

securing the holder's obligations to purchase the Common Stock under the stock
purchase contracts.

                                        28


     The stock purchase contracts may require Duke Energy to make periodic
payments to the holders of the stock purchase units or vice versa, and such
payments may be unsecured or prefunded on some basis. The stock purchase
contracts may require holders to secure their obligations in a specified manner
and in certain circumstances Duke Energy may deliver newly issued prepaid stock
purchase contracts, often known as prepaid securities, upon release to a holder
of any collateral securing such holder's obligations under the original stock
purchase contract.

     The applicable prospectus supplement will describe the terms of any stock
purchase contracts or stock purchase units and, if applicable, prepaid
securities. The description in the applicable prospectus supplement will not
contain all of the information that you may find useful. For more information,
you should review the stock purchase contracts, the collateral arrangements and
depositary arrangements, if applicable, relating to such stock purchase
contracts or stock purchase units and, if applicable, the prepaid securities and
the document pursuant to which the prepaid securities will be issued. These
documents will be filed with the SEC promptly after the offering of such stock
purchase contracts or stock purchase units and, if applicable, prepaid
securities.

                    DESCRIPTION OF THE PREFERRED SECURITIES

     Each Trust may issue only one series of Preferred Securities. The Trust
Agreement of each Trust will authorize the Administrative Trustees to issue the
Preferred Securities of that Trust on behalf of that Trust. For additional
information you should refer to the applicable Trust Agreement. The form of
Trust Agreement is an exhibit to the registration statement, of which this
prospectus is a part.

     The prospectus supplement for a particular series of Preferred Securities
being offered will disclose the specific terms related to the offering,
including the price or prices at which the Preferred Securities to be offered
will be issued. Those terms will include some or all of the following:

     o the title of the series;

     o the number of Preferred Securities of the series;

     o the yearly distribution rate, or the method of determining that rate, and
       the date or dates on which distributions will be payable;

     o the date or dates, or method of determining the date or dates, from which
       distributions will be cumulative;

     o the amount that will be paid out of the assets of the Trust to the
       holders of the Preferred Securities upon the voluntary or involuntary
       dissolution, winding-up or termination of the Trust;

     o any obligation that the Trust has to purchase or redeem the Preferred
       Securities, and the price at which, the period within which, and the
       terms and conditions upon which the Trust will purchase or redeem them;

     o any voting rights of the Preferred Securities that are in addition to
       those legally required, including any right that the holders of the
       Preferred Securities have to approve certain actions under or amendments
       to the Trust Agreement;

     o any right that the Trust has to defer distributions on the Preferred
       Securities in the event that Duke Energy extends the interest payment
       period on the related Junior Subordinated Notes; and

     o any other rights, preferences, privileges, limitations or restrictions
       upon the Preferred Securities of the series.

     Duke Energy will guarantee each series of Preferred Securities to the
extent described below under the caption "Description of the Guarantees."

     The applicable prospectus supplement will describe any material United
States federal income tax considerations that apply to the Preferred Securities.

                         DESCRIPTION OF THE GUARANTEES

     Duke Energy will execute the Guarantees from time to time for the benefit
of the holders of the Preferred Securities of the respective Trusts. JPMorgan
Chase Bank will act as Guarantee Trustee under

                                        29


each Guarantee. The Guarantee Trustee will hold each Guarantee for the benefit
of the holders of the Preferred Securities to which it relates.

     The following description of the Guarantees is only a summary and is not
intended to be comprehensive. The form of Guarantee is an exhibit to the
registration statement, of which this prospectus is a part.

General

     Duke Energy will irrevocably and unconditionally agree under each Guarantee
to pay the Guarantee Payments that are defined below, to the extent specified in
that Guarantee, to the holders of the Preferred Securities to which the
Guarantee relates, to the extent that the Guarantee Payments are not paid by or
on behalf of the related Trust. Duke Energy is required to pay the Guarantee
Payments to the extent specified in the relevant Guarantee regardless of any
defense, right of set-off or counterclaim that Duke Energy may have or may
assert against any person.

     The following payments and distributions on the Preferred Securities of a
Trust are Guarantee Payments:

     o any accrued and unpaid distributions required to be paid on the Preferred
       Securities of the Trust, but only to the extent that the Trust has funds
       legally and immediately available for those distributions;

     o the redemption price for any Preferred Securities that the Trust calls
       for redemption, including all accrued and unpaid distributions to the
       redemption date, but only to the extent that the Trust has funds legally
       and immediately available for the payment; and

     o upon a dissolution, winding-up or termination of the Trust, other than in
       connection with the distribution of Junior Subordinated Notes to the
       holders of Trust Securities of the Trust or the redemption of all the
       Preferred Securities of the Trust, the lesser of:

      o the sum of the liquidation amount and all accrued and unpaid
        distributions on the Preferred Securities of the Trust to the payment
        date, to the extent that the Trust has funds legally and immediately
        available for the payment; and

      o the amount of assets of the Trust remaining available for distribution
        to holders of the Preferred Securities of the Trust in liquidation of
        the Trust.

     Duke Energy may satisfy its obligation to make a Guarantee Payment by
making that payment directly to the holders of the related Preferred Securities
or by causing the Trust to make the payment to those holders.

     Each Guarantee will be a full and unconditional guarantee, subject to
certain subordination provisions, of the Guarantee Payments with respect to the
related Preferred Securities from the time of issuance of those Preferred
Securities, except that the Guarantee will apply to the payment of distributions
and other payments on the Preferred Securities only when the Trust has
sufficient funds legally and immediately available to make those distributions
or other payments.

     IF DUKE ENERGY DOES NOT MAKE THE REQUIRED PAYMENTS ON THE JUNIOR
SUBORDINATED NOTES THAT THE PROPERTY TRUSTEE HOLDS UNDER A TRUST, THAT TRUST
WILL NOT MAKE THE RELATED PAYMENTS ON ITS PREFERRED SECURITIES.

Subordination

     Duke Energy's obligations under each Guarantee will be unsecured
obligations of Duke Energy. Those obligations will rank:

     o subordinate and junior in right of payment to all of Duke Energy's other
       liabilities, other than obligations or liabilities that rank equal in
       priority or subordinate by their terms;

     o equal in priority with Duke Energy's Preferred Stock and Preferred Stock
       A and similar guarantees; and

     o senior to Duke Energy's Common Stock.

                                        30


     Duke Energy has Preferred Stock and Preferred Stock A outstanding that will
rank equal in priority with the Guarantees and has Common Stock outstanding that
will rank junior to the Guarantees.

     Each Guarantee will be a guarantee of payment and not of collection. This
means that the guaranteed party may institute a legal proceeding directly
against Duke Energy, as guarantor, to enforce its rights under the Guarantee
without first instituting a legal proceeding against any other person or entity.

     The terms of the Preferred Securities will provide that each holder of the
Preferred Securities, by accepting those Preferred Securities, agrees to the
subordination provisions and other terms of the related Guarantee.

Amendments and Assignment

     Duke Energy may amend each Guarantee without the consent of any holder of
the Preferred Securities to which that Guarantee relates if the amendment does
not materially and adversely affect the rights of those holders. Duke Energy may
otherwise amend each Guarantee with the approval of the holders of at least
66 2/3% of the outstanding Preferred Securities to which that Guarantee relates.

Termination

     Each Guarantee will terminate and be of no further effect when:

     o the redemption price of the Preferred Securities to which the Guarantee
       relates is fully paid;

     o Duke Energy distributes the related Junior Subordinated Notes to the
       holders of those Preferred Securities; or

     o the amounts payable upon liquidation of the related Trust are fully paid.

     Each Guarantee will remain in effect or will be reinstated if at any time
any holder of the related Preferred Securities must restore payment of any sums
paid to that holder with respect to those Preferred Securities or under that
Guarantee.

Events of Default

     An event of default will occur under any Guarantee if Duke Energy fails to
perform any of its payment obligations under that Guarantee. The holders of a
majority of the Preferred Securities of any series may waive any such event of
default and its consequences on behalf of all of the holders of the Preferred
Securities of that series. The Guarantee Trustee is obligated to enforce the
Guarantee for the benefit of the holders of the Preferred Securities of a series
if an event of default occurs under the related Guarantee.

     The holders of a majority of the Preferred Securities to which a Guarantee
relates have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Guarantee Trustee with respect to
that Guarantee or to direct the exercise of any trust or power that the
Guarantee Trustee holds under that Guarantee. Any holder of the related
Preferred Securities may institute a legal proceeding directly against Duke
Energy to enforce that holder's rights under the Guarantee without first
instituting a legal proceeding against the Guarantee Trustee or any other person
or entity.

Concerning the Guarantee Trustee

     JPMorgan Chase Bank will be the Guarantee Trustee. It is also the Property
Trustee, the Subordinated Indenture Trustee, the Senior Indenture Trustee and
the Bond Trustee. Duke Energy and certain of its affiliates maintain deposit
accounts and banking relationships with JPMorgan Chase Bank. JPMorgan Chase Bank
also serves as trustee or agent under other indentures and agreements pursuant
to which securities of Duke Energy and certain of its affiliates are
outstanding.

     The Guarantee Trustee will perform only those duties that are specifically
set forth in each Guarantee unless an event of default under the Guarantee
occurs and is continuing. In case an event of default occurs and is continuing,
the Guarantee Trustee will exercise the same degree of care as a prudent
individual would exercise in the conduct of his or her own affairs. Subject to
those provisions, the Guarantee Trustee is under no obligation to exercise any
of its powers under any Guarantee at the request of any holder of

                                        31


the related Preferred Securities unless that holder offers reasonable indemnity
to the Guarantee Trustee against the costs, expenses and liabilities which it
might incur as a result.

Agreements as to Expenses and Liabilities

     Duke Energy will enter into an Agreement as to Expenses and Liabilities
under each Trust Agreement. Each Agreement as to Expenses and Liabilities will
provide that Duke Energy will, with certain exceptions, irrevocably and
unconditionally guarantee the full payment of any indebtedness, expenses or
liabilities of the related Trust to each person or entity to whom that Trust
becomes indebted or liable. The exceptions are the obligations of the Trust to
pay to the holders of the related Preferred Securities or other similar
interests in that Trust the amounts due to the holders under the terms of those
Preferred Securities or those similar interests.

                              PLAN OF DISTRIBUTION

     Duke Energy and the Trusts may sell securities to one or more underwriters
or dealers for public offering and sale by them, or it may sell the securities
to investors directly or through agents. The prospectus supplement relating to
the securities being offered will set forth the terms of the offering and the
method of distribution and will identify any firms acting as underwriters,
dealers or agents in connection with the offering, including:

     o the name or names of any underwriters;

     o the purchase price of the securities and the proceeds to Duke Energy or
       the Trusts from the sale;

     o any underwriting discounts and other items constituting underwriters'
       compensation;

     o any public offering price;

     o any discounts or concessions allowed or reallowed or paid to dealers; and

     o any securities exchange or market on which the securities may be listed.

     Only those underwriters identified in the prospectus supplement are deemed
to be underwriters in connection with the securities offered in the prospectus
supplement.

     Duke Energy and the Trusts may distribute the securities from time to time
in one or more transactions at a fixed price or prices, which may be changed, or
at prices determined as the prospectus supplement specifies. Duke Energy may
sell securities through forward contracts or similar arrangements. In connection
with the sale of securities, underwriters, dealers or agents may be deemed to
have received compensation from Duke Energy in the form of underwriting
discounts or commissions and also may receive commissions from securities
purchasers for whom they may act as agent. Underwriters may sell the securities
to or through dealers, and such dealers may receive compensation in the form of
discounts, concessions or commissions from the underwriters or commissions from
the purchasers for whom they may act as agent.

     Duke Energy may sell the securities directly or through agents it
designates from time to time. Any agent involved in the offer or sale of the
securities covered by this prospectus, other than at the market offerings of
common stock, will be named in a prospectus supplement relating to such
securities. At the market offerings of common stock may be made by agents.
Commissions payable by Duke Energy to agents will be set forth in a prospectus
supplement relating to the securities being offered. Unless otherwise indicated
in a prospectus supplement, any such agents will be acting on a best-efforts
basis for the period of their appointment.

     Some of the underwriters, dealers or agents and some of their affiliates
who participate in the securities distribution may engage in other transactions
with, and perform other services for, Duke Energy and its subsidiaries or
affiliates in the ordinary course of business.

     Any underwriting or other compensation which Duke Energy pays to
underwriters or agents in connection with the securities offering, and any
discounts, concessions or commissions which underwriters allow to dealers, will
be set forth in the applicable prospectus supplement. Underwriters, dealers and
agents participating in the securities distribution may be deemed to be
underwriters, and any discounts and
                                        32


commissions they receive and any profit they realize on the resale of the
securities may be deemed to be underwriting discounts and commissions under the
Securities Act of 1933. Underwriters, and their controlling persons, and agents
may be entitled, under agreements entered into with Duke Energy and the Trusts,
to indemnification against certain civil liabilities, including liabilities
under the Securities Act of 1933.

                                    EXPERTS

     The consolidated financial statements and the related financial statement
schedule incorporated in this prospectus by reference from Duke Energy's Annual
Report on Form 10-K for the year ended December 31, 2001 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and have been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.

                           VALIDITY OF THE SECURITIES

     Edward M. Marsh, Jr., Esq., who is Duke Energy's Deputy General Counsel and
Assistant Secretary, and Simpson Thacher & Bartlett, New York, New York, will
issue opinions about the validity of the securities offered by Duke Energy in
the applicable prospectus supplement for Duke Energy. Richards, Layton & Finger,
P.A., special Delaware counsel, will issue opinions about the validity of the
Preferred Securities offered in the applicable prospectus supplement for the
Trusts. Counsel named in the applicable prospectus supplement will issue
opinions about the validity of the securities offered by Duke Energy for any
underwriters.

                                        33


                      WHERE YOU CAN FIND MORE INFORMATION

     Duke Energy files annual, quarterly and current reports and other
information with the SEC. You may read and copy any documents that are filed at
SEC Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549.

     You may also obtain copies of these documents at prescribed rates from the
Public Reference Section of the SEC at its Washington address.

     Please call the SEC at 1-800-SEC-0330 for further information. Duke
Energy's filings are also available to the public through:

     o the SEC web site at http://www.sec.gov; and

     o The New York Stock Exchange
       20 Broad Street
       New York, New York 10005.

     Information about Duke Energy is also available on its web site at
http://www.duke-energy.com. Such web site is not a part of this prospectus.

     The SEC allows Duke Energy to "incorporate by reference" the information
Duke Energy files with it, which information incorporated by reference is
considered to be part of this prospectus and any accompanying prospectus
supplement, and later information that Duke Energy files with the SEC will
automatically update and supersede that information as well as the information
included in this prospectus and any accompanying prospectus supplement. Duke
Energy incorporates by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14, or 15(d) of the
Securities Exchange Act of 1934 filed prior to the termination of this offering:

     o Duke Energy's annual report on Form 10-K for the year ended December 31,
       2001;

     o Duke Energy's quarterly reports on Form 10-Q for the quarters ended March
       31, 2002 and June 30, 2002; and

     o Duke Energy's current reports on Form 8-K filed on March 29, 2002 and
       April 15, 2002.

     Duke Energy will provide without charge a copy of these filings, other than
any exhibits unless the exhibits are specifically incorporated by reference into
this prospectus. You may request your copy by writing Duke Energy at the
following address or telephoning one of the following numbers:

    Investor Relations Department
    Duke Energy Corporation
    P.O. Box 1005
    Charlotte, North Carolina 28201
    (704) 382-3853 or (800) 488-3853 (toll-free)

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