Duke Energy 2013 Annual Report Download - page 135

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PART II
DUKE ENERGY CORPORATION • DUKE ENERGY CAROLINAS, LLC • PROGRESS ENERGY, INC. •
DUKE ENERGY PROGRESS, INC. • DUKE ENERGY FLORIDA, INC. • DUKE ENERGY OHIO, INC. • DUKE ENERGY INDIANA, INC.
Combined Notes to Consolidated Financial Statements – (Continued)
than when the outage occurs, (ii) approximately $4 million of contributions
to agencies that provide energy assistance to low-income customers and for
economic development, and (iii) a reduction in the regulatory liability for costs of
removal of $45 million for the rst year. Duke Energy Carolinas also agreed not
to request additional base rate increases to be effective before September 2015.
New rates went into effect on September 18, 2013.
2011 North Carolina Rate Case
On January 27, 2012, the NCUC approved a settlement agreement related
to Duke Energy Carolinas’ request for a rate increase. The Public Staff was a
party to the settlement. On October 23, 2013, the NCUC reafrmed the rate of
return approved in the January 27, 2012 settlement agreement, in response
to an appeal by the NCAG. On November 21, 2013, the NCAG appealed the
reafrmed order. On December 11, 2013, Duke Energy Carolinas and Duke
Energy Progress, along with the Public Staff, led a Motion to Consolidate this
appeal with other North Carolina rate case appeals involving Duke Energy
Carolinas and Duke Energy Progress. Both the NCAG and NC WARN led
responses with the NCSC contesting consolidation. All parties are awaiting a
ruling from the NCSC. Duke Energy Carolinas cannot predict the outcome of
this matter.
William States Lee III Nuclear Station
In December 2007, Duke Energy Carolinas applied to the NRC 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. Submitting the COL application did not commit Duke Energy
Carolinas to build nuclear units. Through several separate orders, the NCUC and
PSCSC concurred with the prudency of Duke Energy Carolinas incurring certain
project development and pre-construction costs, although recovery of costs
is not guaranteed. Duke Energy Carolinas has incurred approximately $382
million, including AFUDC through December 31, 2013. This amount is included
in Net property, plant and equipment on Duke Energy Carolinas’ Consolidated
Balance Sheets.
The Lee COL application is impacted by the ongoing NRC activity to
address its Waste Condence rule. The Waste Condence rule is a generic
nding by the NRC that spent fuel can be managed safely until ultimate
disposal. The U.S. Court of Appeals for the District of Columbia (D.C. Circuit)
remanded the rule to the NRC. The NRC determined that no nal licenses for
new reactors would be issued until the remand is appropriately addressed.
Based upon current timelines from the NRC, licenses would not be issued until
November 2014 at the earliest. The COL is also impacted by the time required
to fully respond to an NRC request for additional information addressing seismic
hazard evaluation resulting from recommendations of the Fukushima Near-Term
Task Force.
Duke Energy Progress
2012 North Carolina Rate Case
On May 30, 2013, the NCUC approved a settlement agreement related
to Duke Energy Progress’ request for a rate increase. The Public Staff was a
party to the settlement agreement. The parties agreed to a two-year step-in
rate increase, with the rst year providing for a $147 million, or a 4.5 percent
average increase in rates, and the second year providing for rates to be
increased by an additional $31 million, or a 1.0 percent average increase in
rates. The agreement is based upon a return on equity of 10.2 percent and
an equity component of the capital structure of 53 percent. The settlement
agreement (i) allows for the recognition of nuclear outage expenses over
the refueling cycle rather than when the outage occurs, (ii) a $20 million
shareholder contribution to agencies that provide energy assistance to
low-income customers, and (iii) a reduction in the regulatory liability for costs
of removal of $20 million for the rst year. New rates went into effect on June 1,
2013.
On July 1, 2013, the NCAG appealed the NCUC’s approval of the rate of
return and capital structure included in the agreement. NC WARN also appealed
various matters in the settlement. On December 11, 2013, Duke Energy
Carolinas and Duke Energy Progress, along with the Public Staff, led a Motion
to Consolidate this appeal with other North Carolina rate case appeals involving
Duke Energy Carolinas and Duke Energy Progress. Both the NCAG and NC WARN
led responses with the NCSC contesting consolidation. All parties are awaiting
a ruling from the NCSC. Duke Energy Progress cannot predict the outcome of
this matter.
L.V. Sutton Combined Cycle Facility
Duke Energy Progress completed construction of a 625 MW combined
cycle natural gas-red generating facility at its existing Sutton Steam Station in
New Hanover County, North Carolina. Sutton began commercial operations in
the fourth quarter of 2013.
Harris Expansion
On February 19, 2008, Duke Energy Progress applied to the NRC for a COL
for two Westinghouse Electric AP1000 reactors at Harris. On May 2, 2013, Duke
Energy Progress requested the NRC to suspend its review activities associated
with the COL. As a result of the decision to suspend the COL applications, Duke
Energy Progress recorded a pretax impairment charge of $22 million during the
second quarter of 2013. This charge represents costs associated with the COL,
which are not probable of recovery. On September 16, 2013 and January 30,
2014, respectively, the NCUC and PSCSC approved the deferral of the respective
retail portion of the COL costs. Approximately $47 million is recorded in
Regulatory assets on Duke Energy Progress’ Consolidated Balance Sheets at
December 31, 2013.
Wholesale Depreciation Rates
On April 19, 2013, Duke Energy Progress led an application with FERC
for acceptance of changes to generation depreciation rates and in August
led for acceptance of additional changes. These changes will affect the rates
of Duke Energy Progress wholesale power customers that purchase or will
purchase power under formula rates. Certain Duke Energy Progress wholesale
customers led interventions and protests. FERC accepted the depreciation
rate changes, subject to refund, and set the matter for settlement and hearing
in a consolidated proceeding. FERC further initiated an action with respect to
the justness and reasonableness of the proposed rate changes. Duke Energy
Progress cannot predict the outcome of this matter.
Duke Energy Florida
FPSC Settlement Agreements
On February 22, 2012, the FPSC approved a settlement agreement
(the 2012 Settlement) among Duke Energy Florida, the Florida Ofce of Public
Counsel (OPC) and other customer advocates. The 2012 Settlement was to
continue through the last billing cycle of December 2016. The agreement