Duke Energy 2011 Annual Report Download - page 143

PART II
DUKE ENERGY CORPORATION •DUKE ENERGY CAROLINAS, LLC •DUKE ENERGY OHIO, INC. •DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
$31 million through a discrete rider. The PUCO granted the request
to defer the costs associated with the storm recovery; however, they
further ordered Duke Energy Ohio to file a separate action pursuant to
which the actual amount of recovery would be determined. On
January 11, 2011, the PUCO approved recovery of $14 million plus
carrying costs which will be spread over a three-year period. Duke
Energy Ohio filed an application for rehearing on February 10, 2011,
as did the consumer advocate, the office of the Ohio Consumers’
Council (OCC). On March 9, 2011, the PUCO denied the rehearing
requests of Duke Energy Ohio and the OCC. Duke Energy Ohio filed a
notice of appeal with the Ohio Supreme Court on May 6, 2011 and
briefs have been filed by Duke Energy Ohio and the PUCO. Oral
arguments were held on February 7, 2012. A decision by the Ohio
Supreme Court is forthcoming.
Capital Expansion Projects.
Overview.
USFE&G is engaged in planning efforts to meet projected load
growth in its service territories. Capacity additions may include new
nuclear, IGCC, coal facilities or gas-fired generation units. Because of
the long lead times required to develop such assets, USFE&G is
taking steps now to ensure those options are available.
Duke Energy Carolinas William States Lee III Nuclear Station.
In December 2007, Duke Energy Carolinas filed an application
with the NRC, which has been docketed for review, for a combined
Construction and Operating License (COL) for two Westinghouse
AP1000 (advanced passive) reactors for the proposed William States
Lee III Nuclear Station (Lee Nuclear Station) at a site in Cherokee
County, South Carolina. Each reactor is capable of producing 1,117
MW. Submitting the COL application does not commit Duke Energy
Carolinas to build nuclear units. Through several separate orders, the
NCUC and PSCSC have allowed Duke Energy to incur project
development and pre-construction costs for the project through
June 30, 2012, and up to an aggregate maximum amount of $350
million.
As a condition to the approval of continued development of the
project, Duke Energy Carolinas shall provide certain monthly reports
to the PSCSC and the ORS. Duke Energy Carolinas has also agreed to
provide a monthly report to certain parties on the progress of
negotiations to acquire an interest in the V.C. Summer Nuclear
Station (refer to discussion below) expansion being developed by
South Carolina Public Service Authority (Santee Cooper) and South
Carolina Electric & Gas Company (SCE&G). Any change in ownership
interest, output allocation, sharing of costs or control and any future
option agreements concerning Lee Nuclear Station shall be subject to
prior approval of the PSCSC.
The NRC review of the COL application continues and the
estimated receipt of the COL is in mid 2013. Duke Energy Carolinas
filed with the Department of Energy (DOE) for a federal loan
guarantee, which has the potential to significantly lower financing
costs associated with the proposed Lee Nuclear Station; however, it
was not among the four projects selected by the DOE for the final
phase of due diligence for the federal loan guarantee program. The
project could be selected in the future if the program funding is
expanded or if any of the current finalists drop out of the program.
Duke Energy Carolinas is seeking partners for Lee Nuclear
Station by issuing options to purchase an ownership interest in the
plant. In the first quarter of 2011, Duke Energy Carolinas entered into
an agreement with JEA that provides JEA with an option to purchase
up to a 20% undivided ownership interest in Lee Nuclear Station.
JEA has 90 days following Duke Energy Carolinas’ receipt of the COL
to exercise the option.
Duke Energy Carolinas V.C. Summer Nuclear Station Letter of
Intent.
In July 2011, Duke Energy Carolinas signed a letter of intent
with Santee Cooper related to the potential acquisition by Duke
Energy Carolinas of a five percent to ten percent ownership interest in
the V.C. Summer Nuclear Station being developed by Santee Cooper
and SCE&G near Jenkinsville, South Carolina. The letter of intent
provides a path for Duke Energy Carolinas to conduct the necessary
due diligence to determine if future participation in this project is
beneficial for its customers.
Duke Energy Carolinas Cliffside Unit 6.
On March 21, 2007, the NCUC issued an order allowing Duke
Energy Carolinas to build an 800 MW coal-fired unit. Following final
equipment selection and the completion of detailed engineering,
CliffsideUnit6isexpectedtohaveanetoutputof825MW.On
January 31, 2008, Duke Energy Carolinas filed its updated cost
estimate of $1.8 billion (excluding AFUDC of $600 million) for the
approved new Cliffside Unit 6. In March 2010, Duke Energy
Carolinas filed an update to the cost estimate of $1.8 billion
(excluding AFUDC) with the NCUC where it reduced the estimated
AFUDC financing costs to $400 million as a result of the December
2009 rate case settlement with the NCUC that allowed the inclusion
of construction work in progress in rate base prospectively. Duke
Energy Carolinas believes that the overall cost of Cliffside Unit 6 will
be reduced by $125 million in federal advanced clean coal tax
credits, as discussed in Note 5. Cliffside Unit 6 is expected to begin
operation by the end of 2012. Also, see Note 5 for information
related to the Cliffside Unit 6 air permit.
Duke Energy Carolinas Dan River and Buck Combined Cycle
Facilities.
In June 2008, the NCUC issued its order approving the
Certificate of Public Convenience and Necessity (CPCN) applications
to construct a 620 MW combined cycle natural gas fired generating
facility at each of Duke Energy Carolinas’ existing Dan River Steam
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