Duke Energy 2014 Annual Report Download - page 150

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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)
to exceed $19 million per year per licensed reactor for each incident. The
assessment may be subject to state premium taxes.
Nuclear Property and Accidental Outage Coverage
Duke Energy Carolinas, Duke Energy Progress and Duke Energy Florida
are members of Nuclear Electric Insurance Limited (NEIL), an industry
mutual insurance company, which provides “all risk” property damage,
decontamination, and premature decommissioning insurance for each station
for losses resulting from damage to its nuclear plants, either due to accidents
or acts of terrorism. Additionally, NEIL provides some replacement power
cost insurance for each station for losses in the event of a major accidental
outage at an insured nuclear station. NEIL requires its members to maintain
an investment grade credit rating or to ensure collectability of their annual
retrospective premium obligation by providing a fi nancial guarantee, letter
of credit, deposit premium or other means of assurance. The companies
are required each year to report to the NRC the current levels and sources
of insurance that demonstrate it possesses suffi cient fi nancial resources to
stabilize and decontaminate its reactors and reactor station sites in the event of
an accident.
Pursuant to regulations of the NRC, each company’s property damage
insurance policies provide that all proceeds from such insurance be applied,
fi rst, to place the plant in a safe and stable condition after a qualifying accident,
and second, to decontaminate the plant before any proceeds can be used for
decommissioning, plant repair or restoration.
Losses resulting from acts of terrorism are covered as common
occurrences, such that if terrorist acts occur against one or more commercial
nuclear power plants insured by NEIL within a 12-month period, they would be
treated as one event and the owners of the plants where the act occurred would
share one full limit of liability. The full limit of liability is currently $3.2 billion.
NEIL sublimits the total aggregate for all of their policies for non-nuclear
terrorist events to approximately $1.83 billion.
Each nuclear facility has accident property damage, decontamination
and premature decommissioning liability insurance from NEIL with limits
of $1.5 billion, except for Crystal River Unit 3. Crystal River Unit 3’s limit is
$1.1 billion and is on an actual cash value basis. NEIL coverage for Crystal
River Unit 3 does not include property damage to or resulting from the containment
structure except coverage does apply to decontamination and debris removal, if
required following an accident, to ensure public health and safety or if property
damage results from a terrorism event. All nuclear facilities except for Catawba
and Crystal River Unit 3 also share an additional $1.25 billion nuclear accident
insurance limit above their dedicated underlying limit. This shared additional
excess limit is not subject to reinstatement in the event of a loss. Catawba has
a dedicated $1.25 billion of additional nuclear accident insurance limit above
its dedicated underlying limit. Catawba and Oconee also have an additional
$750 million of non-nuclear accident property damage limit.
NEIL’s Accidental Outage policy provides some replacement power cost
insurance for losses in the event of a major accident property damage outage of
a nuclear unit. Coverage is provided on a weekly limit basis after a signifi cant
waiting period deductible and at 100 percent of the available weekly limits for
52 weeks and 80 percent of the available weekly limits for the next 110 weeks.
Coverage is provided until policy aggregate limits are met where the accidental
outage policy limit is $490 million for McGuire and Catawba, $381 million for
Oconee, $419 million for Brunswick, $384 million for Harris and $329 million for
Robinson. NEIL sublimits the accidental outage recovery to the fi rst 104 weeks
of coverage not to exceed $328 million from non-nuclear accidental property
damage. Coverage amounts decrease in the event more than one unit at a
station is out of service due to a common accident.
Potential Retroactive Premium Assessments
In the event of NEIL losses, NEIL’s board of directors may assess
member companies retroactive premiums of amounts up to 10 times their
annual premiums for up to 6 years after a loss. NEIL has never exercised this
assessment. The maximum aggregate annual retrospective premium obligations
for Duke Energy Carolinas are $73 million for primary property insurance and
$32 million for accidental outage insurance. The maximum aggregate annual
retrospective premium obligations Duke Energy Progress are $60 million for
primary property insurance and $16 million for accidental outage insurance.
Duke Energy Carolinas maintains excess property insurance for Catawba
with a maximum assessment of $7 million, and shares with Duke Energy
Progress blanket excess property limits across other sites with a combined
potential maximum assessment of $17 million. The current potential maximum
assessments for Duke Energy Florida are $8 million for primary property
insurance. The maximum assessment amounts include 100 percent of Duke
Energy Carolinas’, Duke Energy Progress’, and Duke Energy Florida’s potential
obligations to NEIL for their share of jointly owned reactors.
ENVIRONMENTAL
Duke Energy is subject to international, federal, state, and local regulations
regarding air and water quality, hazardous and solid waste disposal, and other
environmental matters. The Subsidiary Registrants are subject to federal, state,
and local regulations regarding air and water quality, hazardous and solid waste
disposal and other environmental matters. These regulations can be changed
from time to time, imposing new obligations on the Duke Energy Registrants.
The following environmental matters impact all of the Duke Energy
Registrants.
Remediation Activities
The Duke Energy Registrants are responsible for environmental
remediation at various contaminated sites. These include some properties
that are part of ongoing operations and sites formerly owned or used by
Duke Energy entities. These sites are in various stages of investigation,
remediation and monitoring. Managed in conjunction with relevant federal,
state and local agencies, activities vary with site conditions and locations,
remediation requirements, complexity and sharing of responsibility. If
remediation activities involve joint and several liability provisions, strict
liability, or cost recovery or contribution actions, the Duke Energy Registrants
could potentially be held responsible for contamination caused by other
potentially responsible parties, and may also benefi t from insurance policies
or contractual indemnities that cover some or all cleanup costs. Liabilities
are recorded when losses become probable and are reasonably estimable.
The total costs that may be incurred cannot be estimated because the
extent of environmental impact, allocation among potentially responsible
parties, remediation alternatives, and/or regulatory decisions have not yet
been determined. Additional costs associated with remediation activities
are likely to be incurred in the future and could be signifi cant. Costs are
typically expensed as Operation, maintenance and other in the Consolidated
Statements of Operations unless regulatory recovery of the costs is deemed
probable.
The following table contains information regarding reserves for probable
and estimable costs related to the various environmental sites. These reserves
are recorded in Other within Deferred Credits and Other Liabilities on the
Consolidated Balance Sheets.