Duke Energy 2012 Annual Report Download - page 170

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PART II
Combined Notes to Consolidated Financial Statements – (Continued)
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. • CAROLINA POWER & LIGHT COMPANY d/b/a PROGRESS ENERGY
CAROLINAS, INC. • FLORIDA POWER CORPORATION d/b/a PROGRESS ENERY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Years Ended December 31,
(in millions) 2012 2011
Reserves for Legal and Other Matters(a)
Duke Energy(b) $846 $ 810
Duke Energy Carolinas(b) 751 801
Progress Energy 79 83
Progress Energy Carolinas 12 11
Progress Energy Florida(c) 47 51
Duke Energy Indiana 8 4
Probable Insurance Recoveries(d)
Duke Energy(e) $781 $ 813
Duke Energy Carolinas(e) 781 813
(a) Reserves are classifi ed in the respective Consolidated Balance Sheets in Other within Deferred Credits
and Other Liabilities and Other within Current Liabilities.
(b) Includes reserves for aforementioned asbestos-related injuries and damages claims.
(c) Includes workers’ compensation claims.
(d) Insurance recoveries are classifi ed in the respective Consolidated Balance Sheets in Other within
Investments and Other Assets and Receivables.
(e) Relates to recoveries associated with aforementioned asbestos-related injuries and damages claims.
Other Commitments and Contingencies
General
As part of its normal business, the Duke Energy Registrants are a party
to various fi nancial guarantees, performance guarantees and other contractual
commitments to extend guarantees of credit and other assistance to various
subsidiaries, investees and other third parties. To varying degrees, these
guarantees involve elements of performance and credit risk, which are not
included on the respective Consolidated Balance Sheets. The possibility of any
of the Duke Energy Registrants having to honor their contingencies is largely
dependent upon future operations of various subsidiaries, investees and other
third parties, or the occurrence of certain future events.
In addition, the Duke Energy Registrants enter into various fi xed-price,
non-cancelable commitments to purchase or sell power (tolling arrangements
or power purchase contracts), take-or-pay arrangements, transportation or
throughput agreements and other contracts that may or may not be recognized
on their respective Consolidated Balance Sheets. Some of these arrangements
may be recognized at fair value on the respective Consolidated Balance Sheets
if such contracts meet the defi nition of a derivative and the NPNS exception
does not apply. In most cases, the Duke Energy Registrants purchase obligation
contracts contain provisions for price adjustments, minimum purchase levels
and other fi nancial commitments. The commitment amounts presented below
are estimates and therefore will likely differ from actual purchase amounts.
Purchase Obligations
The following table presents long-term commitments that are noncancelable or
are cancelable only under certain conditions, have a term of more than one year, and
that third parties have used to secure fi nancing for the facilities that will provide the
contracted goods or services as of December 31, 2012.
(in millions) 2013 2014 2015 2016 2017 Thereafter Total
Duke Energy(a) $68 $19 $5 $3 $ 2 $18 $115
Progress Energy(a) 68 19 5 3 2 18 115
Progress Energy Florida(a) 68 19 5 3 2 18 115
(a) Represents estimated amounts for Progress Energy Florida’s obligations primarily related to selected
components of long lead time equipment at Levy as discussed under “Other Purchase Obligations.”
Purchases under the above long-term purchase agreements were
$ 29 million, $6 million and $ 23 million in 2012, 2011 and 2010, respectively.
Purchased Power
The Duke Energy Registrants have ongoing purchased power contracts,
including renewable energy contracts, with other utilities, certain co-generators
and qualifi ed facilities (QFs), with expiration dates ranging from 2013 to 2032.
These purchased power contracts generally provide for capacity and energy
payments or bundled capacity and energy payments. In addition, the
Duke Energy Registrants have various contracts to secure transmission rights.
Certain purchased power agreements are classifi ed as leases.
Progress Energy Carolinas has executed certain fi rm contracts for purchased
power with other utilities, including tolling contracts, with expiration dates ranging
from 2017 to 2032 and representing 100 percent of plant net output. Minimum
purchases under these contracts, including those classifi ed as leases, are
approximately $88 million, $90 million, $ 91 million, $92 million and $ 80 million
for 2013 through 2017, respectively, and $578 million payable thereafter.
Progress Energy Florida has executed certain fi rm contracts for purchased
power with other utilities, including tolling contracts, with expiration dates
ranging from 2017 to 2027 and representing between 2 percent and 100 percent
of plant net output. Minimum purchases under these contracts, including
those classifi ed as leases, are approximately $ 102 million, $102 million,
$ 102 million, $71 million and $49 million for 2013 through 2017, respectively,
and $381 million payable thereafter.
Progress Energy Florida has ongoing purchased power contracts with
certain QFs for fi rm capacity with expiration dates ranging from 2013 to
2025. Energy payments are based on the actual power taken under these
contracts. Capacity payments are subject to the QFs meeting certain contract
performance obligations. These contracts account for 100 percent of the net
generating capacity of each of the facilities. All ongoing commitments have
been approved by the FPSC. Minimum expected future capacity payments under
these contracts are $309 million, $ 237 million, $244 million, $ 273 million and
$288 million for 2013 through 2017, respectively, and $ 2,440 million payable
thereafter. The FPSC allows the capacity payments to be recovered through a
capacity cost-recovery clause, which is similar to, and works in conjunction
with, energy payments recovered through the fuel cost-recovery clause.
Duke Energy Ohio has executed certain fi rm contracts for purchased
power with other utilities with expiration dates ranging from 2013 to 2015 and
representing between 1 percent and 24 percent of plant net output. Minimum
purchases under these contracts are approximately $316 million, $252 million
and $80 million for 2013 through 2015, respectively.
Other Purchase Obligations
The long-term commitments related to Levy presented in the previous
table for Duke Energy, Progress Energy and Progress Energy Florida include
only selected components of long lead time equipment. As discussed in Note 4,
Progress Energy Florida identifi ed a schedule shift in the Levy project, and major
construction activities on Levy have been postponed until after the NRC issues
the COL for the plants. Due to the schedule shifts, Progress Energy Florida has
executed amendments to the Levy engineering, procurement and construction
(EPC) agreement. The EPC agreement includes provisions for termination. For
termination without cause, the EPC agreement contains exit provisions with
termination fees, which may be signifi cant, that vary based on the termination
circumstances. Because Progress Energy Florida has executed amendments to
the EPC agreement and anticipates negotiating additional amendments upon
receipt of the COL, Progress Energy Florida cannot currently predict when those
obligations will be satisfi ed or the magnitude of any change. Progress Energy
Florida cannot predict the outcome of this matter.