Duke Energy 2013 Annual Report Download - page 137

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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)
will be adjusted at least every four years. Included in this recovery, but not
subject to the cap, are costs of building a dry cask storage facility for spent
nuclear fuel. The return rate will be based on the currently approved AFUDC rate
with a return on equity of 7.35 percent, or 70 percent of the currently approved
10.5 percent. The return rate is subject to change if the return on equity changes
in the future. Construction of the dry cask storage facility is subject to separate
FPSC approval. The regulatory asset associated with the uprate project will
continue to be recovered through the Nuclear Cost Recovery Clause (NCRC) over
an estimated seven-year period beginning in 2013.
Through December 31, 2013, Duke Energy Florida deferred $1,310 million
for rate recovery related to Crystal River Unit 3, which is subject to the rate
recovery cap in the 2013 Settlement. In addition, Duke Energy Florida deferred
$323 million for recovery costs associated with building a dry cask storage
facility and the original uprate project, which is not subject to the rate recovery
cap discussed above. Duke Energy Florida does not expect the Crystal River Unit
3 regulatory asset to exceed the cap prior to full cash recovery from its retail
customers.
The following table includes a summary of retail customer refunds agreed
to in the 2012 Settlement and the 2013 Settlement.
December 31, 2013
Remaining Amount to be Refunded
Refunded to
(in millions) Total date 2014 2015 2016
2012 Settlement refund(a) $ 288 $ 129 $ 139 $ 10 $ 10
Retirement decision refund 100 — — 40 60
NEIL proceeds 490 326 164 — —
Total customer refunds 878 455 303 50 70
Accelerated regulatory asset recovery (130) — (37) (37) (56)
Net customer refunds $ 748 $ 455 $ 266 $ 13 $ 14
(a) See discussion under Customer Rate Matters section below.
Duke Energy Florida is a party to a master participation agreement
and other related agreements with the joint owners of Crystal River Unit 3,
which convey certain rights and obligations on Duke Energy Florida and the
joint owners. In December 2012, Duke Energy Florida reached an agreement
with one joint owner and extended a settlement offer to the other joint owner
related to all Crystal River Unit 3 matters. Duke Energy Florida recorded a
charge of $45 million in the fourth quarter of 2012 related to the December
2012 settlement and settlement offer. In January 2014, Duke Energy Florida
reached an agreement in principle with the remaining joint owner regarding
resolution of matters associated with Crystal River Unit 3 based on condition
precedents that must be met in order to carry out the agreement. Duke Energy
Florida recorded a charge of $57 million in the fourth quarter of 2013 related to
the January 2014 agreement. The signicant majority of these amounts were
included in Operations, maintenance and other on the Statements of Operations
and Comprehensive Income.
Customer Rate Matters
Pursuant to the 2013 Settlement, Duke Energy Florida will maintain
base rates at the current level through the last billing period of 2018, subject
to the return on equity range of 9.5 percent to 11.5 percent, with exceptions
for base rate increases for the recovery of the Crystal River Unit 3 regulatory
asset beginning no later than 2017 and base rate increases for new generation
through 2018, per the provisions of the 2013 Settlement. Duke Energy Florida is
not required to le a depreciation study, fossil dismantlement study or nuclear
decommissioning study until the earlier of the next rate case ling or March 31,
2019. The 2012 Settlement provided for a $150 million increase in base revenue
effective with the rst billing cycle of January 2013. Costs associated with
Crystal River Unit 3 investments were removed from retail rate base effective
with the rst billing cycle of January 2013. Duke Energy Florida is accruing,
for future rate-setting purposes, a carrying charge on the Crystal River Unit 3
investment until the Crystal River Unit 3 regulatory asset is recovered in base
rates. If Duke Energy Florida’s retail base rate earnings fall below the return on
equity range, as reported on a FPSC-adjusted or pro-forma basis on a monthly
earnings surveillance report, it may petition the FPSC to amend its base rates
during the term of the 2013 Settlement.
Duke Energy Florida is refunding $288 million to retail customers through
its fuel clause, as required by the 2012 Settlement.
Levy
On July 28, 2008, Duke Energy Florida applied to the NRC for a COL for
two Westinghouse AP1000 reactors at Levy. Various parties led a joint petition
to intervene in the Levy COL application. On March 26, 2013, the Atomic Safety
and Licensing Board issued a ruling that the NRC had carried its burden of
demonstrating its Final Environmental Impact Statement complies with the
National Environmental Policy Act and applicable NRC regulatory requirements.
In 2008, the FPSC granted Duke Energy Florida’s petition for an afrmative
Determination of Need and related orders requesting cost recovery under
Florida’s nuclear cost-recovery rule, together with the associated facilities,
including transmission lines and substation facilities.
Under the terms of the 2012 Settlement, Duke Energy Florida began retail
cost recovery of Levy costs effective in the rst billing cycle of January 2013 at
the xed rates contained in the settlement and continuing for a ve-year period,
with true-up of any actual costs not recovered during the ve-year period
occurring in the nal year. This amount is intended to recover the estimated
retail project costs to date including costs necessary to obtain the COL and any
engineering, procurement and construction (EPC) agreement cancellation costs.
The 2012 Settlement provided that Duke Energy Florida will treat the allocated
wholesale cost of Levy as a retail regulatory asset and include this asset as a
component of rate base and amortization expense for regulatory reporting. The
consumer parties agree to not oppose Duke Energy Florida continuing to pursue
a COL for Levy.