Duke Energy 2011 Annual Report Download - page 28

PART I
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 Office of Regulatory Staff (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 expansion being developed by South
Carolina Public Service Authority (Santee Cooper) and South Carolina
Electric & Gas Company . 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.
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 allowance for funds used during
construction (AFUDC) of $600 million) for the approved new Cliffside
Unit 6. In March 2010, Duke Energy Carolinas filed an updated 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. The Cliffside Unit 6 project is
approximately 95% complete as of December 31, 2011 and is
currently anticipated to be completed and in-service in 2012.
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
Station and Buck Steam Station. The Division of Air Quality (DAQ)
issued a final air permit authorizing construction of the Buck and Dan
River combined cycle natural gas-fired generating units in October
2008 and August 2009, respectively.
Based on the most updated cost estimates, total costs (including
AFUDC) for the Buck and Dan River projects are $675 million and
$710 million, respectively. In November 2011, Duke Energy
Carolinas placed the Buck combined cycle natural gas-fired
generation facility in service. The Dan River project is approximately
77% complete as of December 31, 2011, and expected to be placed
into service by the end of 2012.
Edwardsport IGCC.
In September 2006, Duke Energy Indiana and Southern
Indiana Gas and Electric Company d/b/a Vectren Energy Delivery of
Indiana (Vectren) filed a joint petition with the IURC seeking a CPCN
for the construction of a 618 MW IGCC power plant at Duke Energy
Indiana’s Edwardsport Generating Station in Knox County, Indiana.
The facility was initially estimated to cost approximately $1.985
billion (including $120 million of AFUDC). In August 2007, Vectren
formally withdrew its participation in the IGCC plant and a hearing
was conducted on the CPCN petition based on Duke Energy Indiana
owning 100% of the project. On November 20, 2007, the IURC
issued an order granting Duke Energy Indiana a CPCN for the
proposed IGCC project, approved the cost estimate of $1.985 billion
and approved the timely recovery of costs related to the project. On
January 25, 2008, Duke Energy Indiana received the final air permit
from the Indiana Department of Environmental Management. The
Citizens Action Coalition of Indiana, Inc. (CAC), Sierra Club, Inc.,
Save the Valley, Inc., and Valley Watch, Inc., all intervenors in the
CPCN proceeding, have appealed the air permit.
On May 1, 2008, Duke Energy Indiana filed its first semi-
annual IGCC rider and ongoing review proceeding with the IURC as
required under the CPCN order issued by the IURC. In its filing, Duke
Energy Indiana requested approval of a new cost estimate for the
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